Correlation Between Superior Plus and Starbucks

Can any of the company-specific risk be diversified away by investing in both Superior Plus and Starbucks at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Superior Plus and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Superior Plus Corp and Starbucks, you can compare the effects of market volatilities on Superior Plus and Starbucks and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Superior Plus with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Starbucks.

Diversification Opportunities for Superior Plus and Starbucks

-0.39

Correlation Coefficient

Superior Plus  Starbucks

Very good diversification

The 3 months correlation between Superior and Starbucks is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Superior Plus is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Superior Plus Corp are associated (or correlated) with Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Superior Plus i.e., Superior Plus and Starbucks go up and down completely randomly.

Pair Corralation between Superior Plus and Starbucks

Assuming the 90 days horizon Superior Plus Corp is expected to generate 1.18 times more return on investment than Starbucks. However, Superior Plus is 1.18 times more volatile than Starbucks. It trades about 0.01 of its potential returns per unit of risk. Starbucks is currently generating about 0.01 per unit of risk. If you would invest  413.00  in Superior Plus Corp on December 25, 2024 and sell it today you would earn a total of  1.00  from holding Superior Plus Corp or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Superior Plus Corp  vs.  Starbucks

Superior Plus Corp

Risk-Adjusted Performance

Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Superior Plus is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Starbucks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Starbucks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Starbucks is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Superior Plus and Starbucks

The main advantage of trading using opposite Superior Plus and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus position performs unexpectedly, Starbucks can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Starbucks will offset losses from the drop in Starbucks' long position.

The idea behind Superior Plus Corp and Starbucks pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.