Correlation Between Luckin Coffee and China Resources
Can any of the company-specific risk be diversified away by investing in both Luckin Coffee and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Luckin Coffee and China Resources Power, you can compare the effects of market volatilities on Luckin Coffee and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luckin Coffee and China Resources.
Diversification Opportunities for Luckin Coffee and China Resources
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Luckin and China is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Power has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and China Resources go up and down completely randomly.
Pair Corralation between Luckin Coffee and China Resources
Assuming the 90 days trading horizon Luckin Coffee is expected to generate 2.39 times more return on investment than China Resources. However, Luckin Coffee is 2.39 times more volatile than China Resources Power. It trades about 0.14 of its potential returns per unit of risk. China Resources Power is currently generating about -0.09 per unit of risk. If you would invest 2,140 in Luckin Coffee on October 28, 2024 and sell it today you would earn a total of 420.00 from holding Luckin Coffee or generate 19.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Luckin Coffee vs. China Resources Power
Performance |
Timeline |
Luckin Coffee |
China Resources Power |
Luckin Coffee and China Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Luckin Coffee and China Resources
The main advantage of trading using opposite Luckin Coffee and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luckin Coffee position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.Luckin Coffee vs. Global Ship Lease | Luckin Coffee vs. DETALION GAMES SA | Luckin Coffee vs. IMPERIAL TOBACCO | Luckin Coffee vs. GAMESTOP |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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