Correlation Between Starbucks and Geo
Can any of the company-specific risk be diversified away by investing in both Starbucks and Geo 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 Geo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and Geo Group, you can compare the effects of market volatilities on Starbucks and Geo 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 Geo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Geo.
Diversification Opportunities for Starbucks and Geo
Pay attention - limited upside
The 3 months correlation between Starbucks and Geo is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Geo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geo Group 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 Geo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geo Group has no effect on the direction of Starbucks i.e., Starbucks and Geo go up and down completely randomly.
Pair Corralation between Starbucks and Geo
Given the investment horizon of 90 days Starbucks is expected to under-perform the Geo. But the stock apears to be less risky and, when comparing its historical volatility, Starbucks is 2.72 times less risky than Geo. The stock trades about -0.16 of its potential returns per unit of risk. The Geo Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,457 in Geo Group on January 25, 2024 and sell it today you would earn a total of 42.00 from holding Geo Group or generate 2.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Starbucks vs. Geo Group
Performance |
Timeline |
Starbucks |
Geo Group |
Starbucks and Geo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Starbucks and Geo
The main advantage of trading using opposite Starbucks and Geo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, Geo 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 Geo will offset losses from the drop in Geo's long position.Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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