Correlation Between International Meal and Starbucks

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

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

Diversification Opportunities for International Meal and Starbucks

0.0

Correlation Coefficient

International Meal  Starbucks

Pay attention - limited upside

The 3 months correlation between International and Starbucks is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding International Meal and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and International Meal 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 International Meal 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 International Meal i.e., International Meal and Starbucks go up and down completely randomly.

Pair Corralation between International Meal and Starbucks

If you would invest  44,194  in Starbucks on October 8, 2024 and sell it today you would earn a total of  13,447  from holding Starbucks or generate 30.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.41%
Values	Daily Returns

International Meal  vs.  Starbucks

International Meal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Starbucks

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Starbucks may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with International Meal and Starbucks

The main advantage of trading using opposite International Meal and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Meal 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 International Meal 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.