Correlation Between Teladoc Health and Starbucks

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

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

Diversification Opportunities for Teladoc Health and Starbucks

0.54

Correlation Coefficient

Teladoc Health  Starbucks

Very weak diversification

The 3 months correlation between Teladoc and Starbucks is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Teladoc Health and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Teladoc Health 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 Teladoc Health are associated (or correlated) with Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Teladoc Health i.e., Teladoc Health and Starbucks go up and down completely randomly.

Pair Corralation between Teladoc Health and Starbucks

Assuming the 90 days trading horizon Teladoc Health is expected to generate 5.46 times more return on investment than Starbucks. However, Teladoc Health is 5.46 times more volatile than Starbucks. It trades about 0.02 of its potential returns per unit of risk. Starbucks is currently generating about -0.03 per unit of risk. If you would invest  196.00  in Teladoc Health on December 26, 2024 and sell it today you would lose (31.00) from holding Teladoc Health or give up 15.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Teladoc Health  vs.  Starbucks

Teladoc Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teladoc Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Teladoc Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Starbucks

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Teladoc Health and Starbucks

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

The idea behind Teladoc Health and Starbucks 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.