Correlation Between Luckin Coffee and Gaztransport Technigaz

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

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

Diversification Opportunities for Luckin Coffee and Gaztransport Technigaz

0.53

Correlation Coefficient

Luckin Coffee  Gaztransport Technigaz

Very weak diversification

The 3 months correlation between Luckin and Gaztransport is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and Gaztransport Technigaz SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport Technigaz 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 Gaztransport Technigaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport Technigaz has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and Gaztransport Technigaz go up and down completely randomly.

Pair Corralation between Luckin Coffee and Gaztransport Technigaz

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 1.17 times more return on investment than Gaztransport Technigaz. However, Luckin Coffee is 1.17 times more volatile than Gaztransport Technigaz SA. It trades about 0.16 of its potential returns per unit of risk. Gaztransport Technigaz SA is currently generating about 0.08 per unit of risk. If you would invest  2,280  in Luckin Coffee on December 25, 2024 and sell it today you would earn a total of  740.00  from holding Luckin Coffee or generate 32.46% return on investment over 90 days.

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

Luckin Coffee  vs.  Gaztransport Technigaz SA

Luckin Coffee

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Luckin Coffee unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gaztransport Technigaz

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport Technigaz SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gaztransport Technigaz reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luckin Coffee and Gaztransport Technigaz

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

The idea behind Luckin Coffee and Gaztransport Technigaz SA 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.