Correlation Between Starbucks and FedNat Holding

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

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

Diversification Opportunities for Starbucks and FedNat Holding

0.0

Correlation Coefficient

Starbucks  FedNat Holding

Pay attention - limited upside

The 3 months correlation between Starbucks and FedNat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and FedNat Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedNat Holding and Starbucks 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 Starbucks are associated (or correlated) with FedNat Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedNat Holding has no effect on the direction of Starbucks i.e., Starbucks and FedNat Holding go up and down completely randomly.

Pair Corralation between Starbucks and FedNat Holding

If you would invest  10,027  in Starbucks on October 11, 2024 and sell it today you would lose (767.00) from holding Starbucks or give up 7.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Starbucks  vs.  FedNat Holding

Starbucks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starbucks has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

FedNat Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FedNat Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, FedNat Holding is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Starbucks and FedNat Holding

The main advantage of trading using opposite Starbucks and FedNat Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, FedNat Holding 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 FedNat Holding will offset losses from the drop in FedNat Holding's long position.

The idea behind Starbucks and FedNat Holding 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.