Correlation Between Computershare and Starbucks

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

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

Diversification Opportunities for Computershare and Starbucks

0.71

Correlation Coefficient

Computershare  Starbucks

Poor diversification

The 3 months correlation between Computershare and Starbucks is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Computershare Limited and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Computershare 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 Computershare Limited 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 Computershare i.e., Computershare and Starbucks go up and down completely randomly.

Pair Corralation between Computershare and Starbucks

Assuming the 90 days horizon Computershare Limited is expected to generate 1.49 times more return on investment than Starbucks. However, Computershare is 1.49 times more volatile than Starbucks. It trades about 0.19 of its potential returns per unit of risk. Starbucks is currently generating about 0.13 per unit of risk. If you would invest  1,919  in Computershare Limited on November 28, 2024 and sell it today you would earn a total of  601.00  from holding Computershare Limited or generate 31.32% return on investment over 90 days.

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

Computershare Limited  vs.  Starbucks

Computershare Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Computershare reported solid returns over the last few months and may actually be approaching a breakup point.

Starbucks

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Starbucks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computershare and Starbucks

The main advantage of trading using opposite Computershare and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computershare 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 Computershare Limited 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.