Correlation Between COMPASS GROUP and Starbucks
Can any of the company-specific risk be diversified away by investing in both COMPASS GROUP 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 COMPASS GROUP and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COMPASS GROUP and Starbucks, you can compare the effects of market volatilities on COMPASS GROUP 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 COMPASS GROUP with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMPASS GROUP and Starbucks.
Diversification Opportunities for COMPASS GROUP and Starbucks
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between COMPASS and Starbucks is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding COMPASS GROUP and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and COMPASS GROUP 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 COMPASS GROUP 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 COMPASS GROUP i.e., COMPASS GROUP and Starbucks go up and down completely randomly.
Pair Corralation between COMPASS GROUP and Starbucks
Assuming the 90 days horizon COMPASS GROUP is expected to generate 0.63 times more return on investment than Starbucks. However, COMPASS GROUP is 1.58 times less risky than Starbucks. It trades about 0.08 of its potential returns per unit of risk. Starbucks is currently generating about 0.0 per unit of risk. If you would invest 1,991 in COMPASS GROUP on September 23, 2024 and sell it today you would earn a total of 1,049 from holding COMPASS GROUP or generate 52.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
COMPASS GROUP vs. Starbucks
Performance |
Timeline |
COMPASS GROUP |
Starbucks |
COMPASS GROUP and Starbucks Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with COMPASS GROUP and Starbucks
The main advantage of trading using opposite COMPASS GROUP and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMPASS GROUP 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.COMPASS GROUP vs. McDonalds | COMPASS GROUP vs. Starbucks | COMPASS GROUP vs. Starbucks | COMPASS GROUP vs. Compass Group PLC |
Starbucks vs. McDonalds | Starbucks vs. Starbucks | Starbucks vs. Compass Group PLC | Starbucks vs. Yum Brands |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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