Correlation Between Avanos Medical and Luckin Coffee
Can any of the company-specific risk be diversified away by investing in both Avanos Medical 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 Avanos Medical and Luckin Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avanos Medical and Luckin Coffee, you can compare the effects of market volatilities on Avanos Medical 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 Avanos Medical with a short position of Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avanos Medical and Luckin Coffee.
Diversification Opportunities for Avanos Medical and Luckin Coffee
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Avanos and Luckin is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee and Avanos Medical 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 Avanos Medical 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 Avanos Medical i.e., Avanos Medical and Luckin Coffee go up and down completely randomly.
Pair Corralation between Avanos Medical and Luckin Coffee
Assuming the 90 days trading horizon Avanos Medical is expected to under-perform the Luckin Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Avanos Medical is 1.76 times less risky than Luckin Coffee. The stock trades about -0.01 of its potential returns per unit of risk. The Luckin Coffee is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,034 in Luckin Coffee on September 2, 2024 and sell it today you would lose (14.00) from holding Luckin Coffee or give up 0.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avanos Medical vs. Luckin Coffee
Performance |
| Timeline |
| Avanos Medical |
| Luckin Coffee |
Avanos Medical and Luckin Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avanos Medical and Luckin Coffee
The main advantage of trading using opposite Avanos Medical and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avanos Medical 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.| Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc | Avanos Medical vs. Apple Inc |
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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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