Correlation Between JBG SMITH and Starbucks

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

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

Diversification Opportunities for JBG SMITH and Starbucks

-0.6

Correlation Coefficient

JBG SMITH  Starbucks

Excellent diversification

The 3 months correlation between JBG and Starbucks is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding JBG SMITH Properties and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and JBG SMITH 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 JBG SMITH Properties 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 JBG SMITH i.e., JBG SMITH and Starbucks go up and down completely randomly.

Pair Corralation between JBG SMITH and Starbucks

Given the investment horizon of 90 days JBG SMITH Properties is expected to under-perform the Starbucks. In addition to that, JBG SMITH is 1.59 times more volatile than Starbucks. It trades about -0.09 of its total potential returns per unit of risk. Starbucks is currently generating about 0.03 per unit of volatility. If you would invest  9,585  in Starbucks on September 17, 2024 and sell it today you would earn a total of  157.00  from holding Starbucks or generate 1.64% return on investment over 90 days.

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

JBG SMITH Properties  vs.  Starbucks

JBG SMITH Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBG SMITH Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Starbucks

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Starbucks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JBG SMITH and Starbucks

The main advantage of trading using opposite JBG SMITH and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JBG SMITH 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 JBG SMITH Properties 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.