Correlation Between Starbucks and BECTON

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

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

Diversification Opportunities for Starbucks and BECTON

-0.42

Correlation Coefficient

Starbucks  BECTON

Very good diversification

The 3 months correlation between Starbucks and BECTON is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and BECTON DICKINSON AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BECTON DICKINSON AND 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 BECTON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BECTON DICKINSON AND has no effect on the direction of Starbucks i.e., Starbucks and BECTON go up and down completely randomly.

Pair Corralation between Starbucks and BECTON

Given the investment horizon of 90 days Starbucks is expected to generate 2.22 times more return on investment than BECTON. However, Starbucks is 2.22 times more volatile than BECTON DICKINSON AND. It trades about 0.01 of its potential returns per unit of risk. BECTON DICKINSON AND is currently generating about -0.18 per unit of risk. If you would invest  9,796  in Starbucks on September 13, 2024 and sell it today you would earn a total of  46.00  from holding Starbucks or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Starbucks  vs.  BECTON DICKINSON AND

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.

BECTON DICKINSON AND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BECTON DICKINSON AND has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BECTON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Starbucks and BECTON

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

The idea behind Starbucks and BECTON DICKINSON AND 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.