Correlation Between Luckin Coffee and Alfen NV

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

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

Diversification Opportunities for Luckin Coffee and Alfen NV

0.19

Correlation Coefficient

Luckin Coffee  Alfen NV

Average diversification

The 3 months correlation between Luckin and Alfen is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV 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 Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and Alfen NV go up and down completely randomly.

Pair Corralation between Luckin Coffee and Alfen NV

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 1.52 times more return on investment than Alfen NV. However, Luckin Coffee is 1.52 times more volatile than Alfen NV. It trades about 0.13 of its potential returns per unit of risk. Alfen NV is currently generating about 0.04 per unit of risk. If you would invest  1,680  in Luckin Coffee on September 13, 2024 and sell it today you would earn a total of  620.00  from holding Luckin Coffee or generate 36.9% return on investment over 90 days.

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

Luckin Coffee  vs.  Alfen NV

Luckin Coffee

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 10 (%) 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.

Alfen NV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfen NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Alfen NV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Luckin Coffee and Alfen NV

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

The idea behind Luckin Coffee and Alfen NV 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.