Correlation Between SOFI TECHNOLOGIES and Luckin Coffee

Can any of the company-specific risk be diversified away by investing in both SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES and Luckin Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOFI TECHNOLOGIES and Luckin Coffee, you can compare the effects of market volatilities on SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES with a short position of Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFI TECHNOLOGIES and Luckin Coffee.

Diversification Opportunities for SOFI TECHNOLOGIES and Luckin Coffee

-0.43

Correlation Coefficient

SOFI TECHNOLOGIES  Luckin Coffee

Very good diversification

The 3 months correlation between SOFI and Luckin is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee and SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and Luckin Coffee go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and Luckin Coffee

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to under-perform the Luckin Coffee. In addition to that, SOFI TECHNOLOGIES is 1.27 times more volatile than Luckin Coffee. It trades about -0.08 of its total potential returns per unit of risk. Luckin Coffee is currently generating about 0.19 per unit of volatility. If you would invest  2,240  in Luckin Coffee on December 22, 2024 and sell it today you would earn a total of  920.00  from holding Luckin Coffee or generate 41.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SOFI TECHNOLOGIES  vs.  Luckin Coffee

SOFI TECHNOLOGIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOFI TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Luckin Coffee

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Luckin Coffee unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOFI TECHNOLOGIES and Luckin Coffee

The main advantage of trading using opposite SOFI TECHNOLOGIES and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.