Correlation Between Starbucks and American Airlines
Can any of the company-specific risk be diversified away by investing in both Starbucks and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and American Airlines Group, you can compare the effects of market volatilities on Starbucks and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and American Airlines.
Diversification Opportunities for Starbucks and American Airlines
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Starbucks and American is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Starbucks i.e., Starbucks and American Airlines go up and down completely randomly.
Pair Corralation between Starbucks and American Airlines
Given the investment horizon of 90 days Starbucks is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Starbucks is 1.68 times less risky than American Airlines. The stock trades about -0.05 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,284 in American Airlines Group on January 20, 2024 and sell it today you would earn a total of 118.00 from holding American Airlines Group or generate 9.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Starbucks vs. American Airlines Group
Performance |
| Timeline |
| Starbucks |
| American Airlines |
Starbucks and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and American Airlines
The main advantage of trading using opposite Starbucks and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Transaction History View history of all your transactions and understand their impact on performance |