Correlation Between Luckin Coffee and American Airlines
Can any of the company-specific risk be diversified away by investing in both Luckin Coffee and American Airlines 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 Luckin Coffee and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Luckin Coffee and American Airlines Group, you can compare the effects of market volatilities on Luckin Coffee and American Airlines 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 Luckin Coffee with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luckin Coffee and American Airlines.
Diversification Opportunities for Luckin Coffee and American Airlines
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Luckin and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Luckin Coffee 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 Luckin Coffee are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and American Airlines go up and down completely randomly.
Pair Corralation between Luckin Coffee and American Airlines
Assuming the 90 days trading horizon Luckin Coffee is expected to generate 0.71 times more return on investment than American Airlines. However, Luckin Coffee is 1.41 times less risky than American Airlines. It trades about 0.13 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.0 per unit of risk. If you would invest 2,580 in Luckin Coffee on November 2, 2024 and sell it today you would earn a total of 140.00 from holding Luckin Coffee or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Luckin Coffee vs. American Airlines Group
Performance |
| Timeline |
| Luckin Coffee |
| American Airlines |
Luckin Coffee and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Luckin Coffee and American Airlines
The main advantage of trading using opposite Luckin Coffee and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luckin Coffee position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Luckin Coffee vs. Kingdee International Software | Luckin Coffee vs. Calibre Mining Corp | Luckin Coffee vs. BioNTech SE | Luckin Coffee vs. HELIOS TECHS INC |
| American Airlines vs. FIREWEED METALS P | American Airlines vs. SENECA FOODS A | American Airlines vs. Moneysupermarket Group PLC | American Airlines vs. Jacquet Metal Service |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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