Correlation Between BJs Restaurants and Luckin Coffee
Can any of the company-specific risk be diversified away by investing in both BJs Restaurants 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 BJs Restaurants and Luckin Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BJs Restaurants and Luckin Coffee, you can compare the effects of market volatilities on BJs Restaurants 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 BJs Restaurants with a short position of Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of BJs Restaurants and Luckin Coffee.
Diversification Opportunities for BJs Restaurants and Luckin Coffee
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BJs and Luckin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding BJs Restaurants and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee and BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants i.e., BJs Restaurants and Luckin Coffee go up and down completely randomly.
Pair Corralation between BJs Restaurants and Luckin Coffee
Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.64 times less return on investment than Luckin Coffee. But when comparing it to its historical volatility, BJs Restaurants is 1.43 times less risky than Luckin Coffee. It trades about 0.04 of its potential returns per unit of risk. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BJs Restaurants vs. Luckin Coffee
Performance |
| Timeline |
| BJs Restaurants |
| Luckin Coffee |
BJs Restaurants and Luckin Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BJs Restaurants and Luckin Coffee
The main advantage of trading using opposite BJs Restaurants and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants 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.| BJs Restaurants vs. ELECTRONIC ARTS | BJs Restaurants vs. REVO INSURANCE SPA | BJs Restaurants vs. Japan Post Insurance | BJs Restaurants vs. Safety Insurance Group |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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