Correlation Between Starbucks and Melar Acquisition

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

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

Diversification Opportunities for Starbucks and Melar Acquisition

0.2

Correlation Coefficient

Starbucks  Melar Acquisition

Modest diversification

The 3 months correlation between Starbucks and Melar is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Melar Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melar Acquisition Corp 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 Melar Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melar Acquisition Corp has no effect on the direction of Starbucks i.e., Starbucks and Melar Acquisition go up and down completely randomly.

Pair Corralation between Starbucks and Melar Acquisition

Given the investment horizon of 90 days Starbucks is expected to generate 4.39 times less return on investment than Melar Acquisition. In addition to that, Starbucks is 3.32 times more volatile than Melar Acquisition Corp. It trades about 0.0 of its total potential returns per unit of risk. Melar Acquisition Corp is currently generating about 0.02 per unit of volatility. If you would invest  1,000.00  in Melar Acquisition Corp on October 11, 2024 and sell it today you would earn a total of  12.00  from holding Melar Acquisition Corp or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	28.69%
Values	Daily Returns

Starbucks  vs.  Melar Acquisition Corp

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.

Melar Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Starbucks and Melar Acquisition

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

The idea behind Starbucks and Melar Acquisition Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.