Correlation Between SOFTBANK P and Luckin Coffee
Can any of the company-specific risk be diversified away by investing in both SOFTBANK P and Luckin Coffee 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 SOFTBANK P and Luckin Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SOFTBANK P ADR and Luckin Coffee, you can compare the effects of market volatilities on SOFTBANK P and Luckin Coffee 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 SOFTBANK P with a short position of Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFTBANK P and Luckin Coffee.
Diversification Opportunities for SOFTBANK P and Luckin Coffee
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SOFTBANK and Luckin is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding SOFTBANK P ADR and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee and SOFTBANK P 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 SOFTBANK P ADR are associated (or correlated) with Luckin Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luckin Coffee has no effect on the direction of SOFTBANK P i.e., SOFTBANK P and Luckin Coffee go up and down completely randomly.
Pair Corralation between SOFTBANK P and Luckin Coffee
Assuming the 90 days trading horizon SOFTBANK P is expected to generate 3.88 times less return on investment than Luckin Coffee. But when comparing it to its historical volatility, SOFTBANK P ADR is 1.41 times less risky than Luckin Coffee. It trades about 0.02 of its potential returns per unit of risk. Luckin Coffee is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,720 in Luckin Coffee on August 29, 2024 and sell it today you would earn a total of 420.00 from holding Luckin Coffee or generate 24.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SOFTBANK P ADR vs. Luckin Coffee
Performance |
| Timeline |
| SOFTBANK P ADR |
| Luckin Coffee |
SOFTBANK P and Luckin Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SOFTBANK P and Luckin Coffee
The main advantage of trading using opposite SOFTBANK P and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOFTBANK P position performs unexpectedly, Luckin Coffee 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 Luckin Coffee will offset losses from the drop in Luckin Coffee's long position.The idea behind SOFTBANK P ADR and Luckin Coffee 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.| Luckin Coffee vs. Apple Inc | Luckin Coffee vs. Apple Inc | Luckin Coffee vs. Apple Inc | Luckin Coffee vs. Apple Inc |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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