Correlation Between Thai Beverage and Luckin Coffee
Can any of the company-specific risk be diversified away by investing in both Thai Beverage 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 Thai Beverage and Luckin Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thai Beverage Public and Luckin Coffee, you can compare the effects of market volatilities on Thai Beverage 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 Thai Beverage with a short position of Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Beverage and Luckin Coffee.
Diversification Opportunities for Thai Beverage and Luckin Coffee
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Thai and Luckin is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Thai Beverage Public and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee and Thai Beverage 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 Thai Beverage Public 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 Thai Beverage i.e., Thai Beverage and Luckin Coffee go up and down completely randomly.
Pair Corralation between Thai Beverage and Luckin Coffee
Assuming the 90 days horizon Thai Beverage Public is expected to generate 1.61 times more return on investment than Luckin Coffee. However, Thai Beverage is 1.61 times more volatile than Luckin Coffee. It trades about 0.09 of its potential returns per unit of risk. Luckin Coffee is currently generating about 0.02 per unit of risk. If you would invest 20.00 in Thai Beverage Public on September 3, 2024 and sell it today you would earn a total of 19.00 from holding Thai Beverage Public or generate 95.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thai Beverage Public vs. Luckin Coffee
Performance |
| Timeline |
| Thai Beverage Public |
| Luckin Coffee |
Thai Beverage and Luckin Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thai Beverage and Luckin Coffee
The main advantage of trading using opposite Thai Beverage and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thai Beverage 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 Thai Beverage Public 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. Apple Inc | Luckin Coffee vs. Apple Inc | Luckin Coffee vs. Apple Inc | Luckin Coffee vs. Apple Inc |
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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