Correlation Between KOOL2PLAY and Luckin Coffee

Can any of the company-specific risk be diversified away by investing in both KOOL2PLAY 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 KOOL2PLAY and Luckin Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KOOL2PLAY SA ZY and Luckin Coffee, you can compare the effects of market volatilities on KOOL2PLAY 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 KOOL2PLAY with a short position of Luckin Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOOL2PLAY and Luckin Coffee.

Diversification Opportunities for KOOL2PLAY and Luckin Coffee

0.06

Correlation Coefficient

KOOL2PLAY  Luckin Coffee

Significant diversification

The 3 months correlation between KOOL2PLAY and Luckin is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding KOOL2PLAY SA ZY and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee and KOOL2PLAY 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 KOOL2PLAY SA ZY 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 KOOL2PLAY i.e., KOOL2PLAY and Luckin Coffee go up and down completely randomly.

Pair Corralation between KOOL2PLAY and Luckin Coffee

Assuming the 90 days horizon KOOL2PLAY SA ZY is expected to under-perform the Luckin Coffee. But the stock apears to be less risky and, when comparing its historical volatility, KOOL2PLAY SA ZY is 1.68 times less risky than Luckin Coffee. The stock trades about -0.11 of its potential returns per unit of risk. The Luckin Coffee is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,080  in Luckin Coffee on September 24, 2024 and sell it today you would earn a total of  100.00  from holding Luckin Coffee or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KOOL2PLAY SA ZY  vs.  Luckin Coffee

KOOL2PLAY SA ZY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KOOL2PLAY SA ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Luckin Coffee

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 5 (%) 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 KOOL2PLAY and Luckin Coffee

The main advantage of trading using opposite KOOL2PLAY and Luckin Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOOL2PLAY 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 KOOL2PLAY SA ZY 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.