Correlation Between Luckin Coffee and Haier Smart

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

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

Diversification Opportunities for Luckin Coffee and Haier Smart

0.89

Correlation Coefficient

Luckin Coffee  Haier Smart

Very poor diversification

The 3 months correlation between Luckin and Haier is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home and Luckin Coffee 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 Luckin Coffee are associated (or correlated) with Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and Haier Smart go up and down completely randomly.

Pair Corralation between Luckin Coffee and Haier Smart

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 1.95 times more return on investment than Haier Smart. However, Luckin Coffee is 1.95 times more volatile than Haier Smart Home. It trades about 0.06 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.12 per unit of risk. If you would invest  1,800  in Luckin Coffee on September 3, 2024 and sell it today you would earn a total of  220.00  from holding Luckin Coffee or generate 12.22% return on investment over 90 days.

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

Luckin Coffee  vs.  Haier Smart Home

Luckin Coffee

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 4 (%) 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.

Haier Smart Home

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Haier Smart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luckin Coffee and Haier Smart

The main advantage of trading using opposite Luckin Coffee and Haier Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luckin Coffee position performs unexpectedly, Haier Smart 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 Haier Smart will offset losses from the drop in Haier Smart's long position.

The idea behind Luckin Coffee and Haier Smart Home 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.