Correlation Between Luckin Coffee and Darden Restaurants
Can any of the company-specific risk be diversified away by investing in both Luckin Coffee and Darden Restaurants 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 Darden Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Luckin Coffee and Darden Restaurants, you can compare the effects of market volatilities on Luckin Coffee and Darden Restaurants 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 Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luckin Coffee and Darden Restaurants.
Diversification Opportunities for Luckin Coffee and Darden Restaurants
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Luckin and Darden is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants 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 Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and Darden Restaurants go up and down completely randomly.
Pair Corralation between Luckin Coffee and Darden Restaurants
Assuming the 90 days trading horizon Luckin Coffee is expected to generate 1.96 times more return on investment than Darden Restaurants. However, Luckin Coffee is 1.96 times more volatile than Darden Restaurants. It trades about 0.12 of its potential returns per unit of risk. Darden Restaurants is currently generating about 0.15 per unit of risk. If you would invest 1,800 in Luckin Coffee on November 2, 2024 and sell it today you would earn a total of 920.00 from holding Luckin Coffee or generate 51.11% 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. Darden Restaurants
Performance |
| Timeline |
| Luckin Coffee |
| Darden Restaurants |
Luckin Coffee and Darden Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Luckin Coffee and Darden Restaurants
The main advantage of trading using opposite Luckin Coffee and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luckin Coffee position performs unexpectedly, Darden Restaurants 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 Darden Restaurants will offset losses from the drop in Darden Restaurants' 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 |
| Darden Restaurants vs. Fortescue Metals Group | Darden Restaurants vs. Kaiser Aluminum | Darden Restaurants vs. DAIDO METAL TD | Darden Restaurants vs. Goodyear Tire Rubber |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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