Correlation Between CMR SAB and Starbucks

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

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

Diversification Opportunities for CMR SAB and Starbucks

0.29

Correlation Coefficient

CMR SAB  Starbucks

Modest diversification

The 3 months correlation between CMR and Starbucks is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CMR SAB de and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and CMR 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 CMR 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 CMR SAB i.e., CMR SAB and Starbucks go up and down completely randomly.

Pair Corralation between CMR SAB and Starbucks

Assuming the 90 days trading horizon CMR SAB de is expected to generate 4.45 times more return on investment than Starbucks. However, CMR SAB is 4.45 times more volatile than Starbucks. It trades about 0.03 of its potential returns per unit of risk. Starbucks is currently generating about -0.03 per unit of risk. If you would invest  128.00  in CMR SAB de on September 17, 2024 and sell it today you would earn a total of  1.00  from holding CMR SAB de or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

CMR SAB de  vs.  Starbucks

CMR SAB de

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CMR SAB de are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, CMR SAB showed solid returns over the last few months and may actually be approaching a breakup point.

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 CMR SAB and Starbucks

The main advantage of trading using opposite CMR SAB and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMR 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 CMR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.