Correlation Between Alsea SAB and Starbucks

Can any of the company-specific risk be diversified away by investing in both Alsea SAB 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 Alsea SAB and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alsea SAB de and Starbucks, you can compare the effects of market volatilities on Alsea SAB 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 Alsea SAB with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alsea SAB and Starbucks.

Diversification Opportunities for Alsea SAB and Starbucks

-0.88

Correlation Coefficient

Alsea SAB  Starbucks

Pay attention - limited upside

The 3 months correlation between Alsea and Starbucks is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alsea SAB de and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Alsea SAB 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 Alsea SAB de 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 Alsea SAB i.e., Alsea SAB and Starbucks go up and down completely randomly.

Pair Corralation between Alsea SAB and Starbucks

Assuming the 90 days trading horizon Alsea SAB de is expected to under-perform the Starbucks. In addition to that, Alsea SAB is 1.33 times more volatile than Starbucks. It trades about -0.19 of its total potential returns per unit of risk. Starbucks is currently generating about -0.03 per unit of volatility. If you would invest  197,814  in Starbucks on September 17, 2024 and sell it today you would lose (1,474) from holding Starbucks or give up 0.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alsea SAB de  vs.  Starbucks

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Starbucks

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Starbucks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alsea SAB and Starbucks

The main advantage of trading using opposite Alsea SAB and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alsea SAB 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 Alsea SAB de 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.