Correlation Between Starbucks and Haemonetics

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

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

Diversification Opportunities for Starbucks and Haemonetics

0.55

Correlation Coefficient

Starbucks  Haemonetics

Very weak diversification

The 3 months correlation between Starbucks and Haemonetics is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Haemonetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haemonetics 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 Haemonetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haemonetics has no effect on the direction of Starbucks i.e., Starbucks and Haemonetics go up and down completely randomly.

Pair Corralation between Starbucks and Haemonetics

Given the investment horizon of 90 days Starbucks is expected to under-perform the Haemonetics. But the stock apears to be less risky and, when comparing its historical volatility, Starbucks is 1.79 times less risky than Haemonetics. The stock trades about -0.03 of its potential returns per unit of risk. The Haemonetics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,497  in Haemonetics on October 11, 2024 and sell it today you would earn a total of  313.00  from holding Haemonetics or generate 4.18% return on investment over 90 days.

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

Starbucks  vs.  Haemonetics

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.

Haemonetics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haemonetics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Haemonetics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Starbucks and Haemonetics

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

The idea behind Starbucks and Haemonetics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.