Correlation Between Xtrackers MSCI and STARBUCKS

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

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

Diversification Opportunities for Xtrackers MSCI and STARBUCKS

0.08

Correlation Coefficient

Xtrackers MSCI  STARBUCKS

Significant diversification

The 3 months correlation between Xtrackers and STARBUCKS is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI EAFE and STARBUCKS PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STARBUCKS PORATION and Xtrackers MSCI 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 Xtrackers MSCI EAFE 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 PORATION has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and STARBUCKS go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and STARBUCKS

Given the investment horizon of 90 days Xtrackers MSCI EAFE is expected to generate 2.49 times more return on investment than STARBUCKS. However, Xtrackers MSCI is 2.49 times more volatile than STARBUCKS PORATION. It trades about 0.1 of its potential returns per unit of risk. STARBUCKS PORATION is currently generating about 0.2 per unit of risk. If you would invest  2,500  in Xtrackers MSCI EAFE on July 19, 2024 and sell it today you would earn a total of  120.00  from holding Xtrackers MSCI EAFE or generate 4.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Xtrackers MSCI EAFE  vs.  STARBUCKS PORATION

Xtrackers MSCI EAFE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI EAFE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

STARBUCKS PORATION

Risk-Adjusted Performance

15 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STARBUCKS PORATION are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat 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 Xtrackers MSCI and STARBUCKS

The main advantage of trading using opposite Xtrackers MSCI and STARBUCKS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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's long position.

The idea behind Xtrackers MSCI EAFE and STARBUCKS PORATION 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.