Correlation Between Starbucks and VNET Group

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

By analyzing existing cross correlation between Starbucks and VNET Group DRC, you can compare the effects of market volatilities on Starbucks and VNET Group 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 VNET Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and VNET Group.

Diversification Opportunities for Starbucks and VNET Group

-0.11

Correlation Coefficient

Starbucks  VNET Group

Good diversification

The 3 months correlation between Starbucks and VNET is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and VNET Group DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VNET Group DRC 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 VNET Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VNET Group DRC has no effect on the direction of Starbucks i.e., Starbucks and VNET Group go up and down completely randomly.

Pair Corralation between Starbucks and VNET Group

Given the investment horizon of 90 days Starbucks is expected to under-perform the VNET Group. But the stock apears to be less risky and, when comparing its historical volatility, Starbucks is 4.9 times less risky than VNET Group. The stock trades about -0.19 of its potential returns per unit of risk. The VNET Group DRC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  152.00  in VNET Group DRC on January 24, 2024 and sell it today you would lose (5.00) from holding VNET Group DRC or give up 3.29% of portfolio value over 90 days.

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

Starbucks  vs.  VNET Group DRC

Starbucks

Risk-Adjusted Performance

0 of 100

Very Weak

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

VNET Group DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VNET Group DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Starbucks and VNET Group

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

The idea behind Starbucks and VNET Group DRC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.