Correlation Between Westrock Coffee and Starbucks

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

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

Diversification Opportunities for Westrock Coffee and Starbucks

0.75

Correlation Coefficient

Westrock Coffee  Starbucks

Poor diversification

The 3 months correlation between Westrock and Starbucks is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee i.e., Westrock Coffee and Starbucks go up and down completely randomly.

Pair Corralation between Westrock Coffee and Starbucks

Given the investment horizon of 90 days Westrock Coffee is expected to under-perform the Starbucks. In addition to that, Westrock Coffee is 3.48 times more volatile than Starbucks. It trades about -0.01 of its total potential returns per unit of risk. Starbucks is currently generating about 0.36 per unit of volatility. If you would invest  9,186  in Starbucks on October 26, 2024 and sell it today you would earn a total of  613.00  from holding Starbucks or generate 6.67% return on investment over 90 days.

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

Westrock Coffee  vs.  Starbucks

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

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

Starbucks

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Westrock Coffee and Starbucks

The main advantage of trading using opposite Westrock Coffee and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westrock Coffee 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 Westrock Coffee 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.