Correlation Between Starbucks and NBCUNIVERSAL

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

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

Diversification Opportunities for Starbucks and NBCUNIVERSAL

0.24

Correlation Coefficient

Starbucks  NBCUNIVERSAL

Modest diversification

The 3 months correlation between Starbucks and NBCUNIVERSAL is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and NBCUNIVERSAL MEDIA LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCUNIVERSAL MEDIA LLC 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 NBCUNIVERSAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBCUNIVERSAL MEDIA LLC has no effect on the direction of Starbucks i.e., Starbucks and NBCUNIVERSAL go up and down completely randomly.

Pair Corralation between Starbucks and NBCUNIVERSAL

Given the investment horizon of 90 days Starbucks is expected to generate 76.8 times less return on investment than NBCUNIVERSAL. But when comparing it to its historical volatility, Starbucks is 1.42 times less risky than NBCUNIVERSAL. It trades about 0.0 of its potential returns per unit of risk. NBCUNIVERSAL MEDIA LLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10,722  in NBCUNIVERSAL MEDIA LLC on October 10, 2024 and sell it today you would earn a total of  70.00  from holding NBCUNIVERSAL MEDIA LLC or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	48.39%
Values	Daily Returns

Starbucks  vs.  NBCUNIVERSAL MEDIA LLC

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.

NBCUNIVERSAL MEDIA LLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NBCUNIVERSAL MEDIA LLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NBCUNIVERSAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Starbucks and NBCUNIVERSAL

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

The idea behind Starbucks and NBCUNIVERSAL MEDIA LLC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.