Correlation Between Nufarm and Luckin Coffee
Can any of the company-specific risk be diversified away by investing in both Nufarm 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 Nufarm and Luckin Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nufarm Limited and Luckin Coffee, you can compare the effects of market volatilities on Nufarm 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 Nufarm with a short position of Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nufarm and Luckin Coffee.
Diversification Opportunities for Nufarm and Luckin Coffee
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nufarm and Luckin is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nufarm Limited and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee and Nufarm 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 Nufarm Limited 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 Nufarm i.e., Nufarm and Luckin Coffee go up and down completely randomly.
Pair Corralation between Nufarm and Luckin Coffee
Assuming the 90 days horizon Nufarm Limited is expected to under-perform the Luckin Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Nufarm Limited is 2.1 times less risky than Luckin Coffee. The stock trades about -0.07 of its potential returns per unit of risk. The Luckin Coffee is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,710 in Luckin Coffee on September 2, 2024 and sell it today you would earn a total of 310.00 from holding Luckin Coffee or generate 18.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nufarm Limited vs. Luckin Coffee
Performance |
| Timeline |
| Nufarm Limited |
| Luckin Coffee |
Nufarm and Luckin Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nufarm and Luckin Coffee
The main advantage of trading using opposite Nufarm and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nufarm 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 Nufarm Limited 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. ALBIS LEASING AG | Luckin Coffee vs. NEWELL RUBBERMAID | Luckin Coffee vs. ETFS Coffee ETC | Luckin Coffee vs. Vulcan Materials |
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.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |