Correlation Between Luckin Coffee and Spirent Communications

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

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

Diversification Opportunities for Luckin Coffee and Spirent Communications

-0.04

Correlation Coefficient

Luckin Coffee  Spirent Communications

Good diversification

The 3 months correlation between Luckin and Spirent is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and Spirent Communications go up and down completely randomly.

Pair Corralation between Luckin Coffee and Spirent Communications

Assuming the 90 days trading horizon Luckin Coffee is expected to under-perform the Spirent Communications. But the stock apears to be less risky and, when comparing its historical volatility, Luckin Coffee is 1.05 times less risky than Spirent Communications. The stock trades about 0.0 of its potential returns per unit of risk. The Spirent Communications plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Spirent Communications plc on October 6, 2024 and sell it today you would earn a total of  106.00  from holding Spirent Communications plc or generate 98.15% return on investment over 90 days.

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

Luckin Coffee  vs.  Spirent Communications plc

Luckin Coffee

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Luckin Coffee may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Spirent Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Spirent Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Luckin Coffee and Spirent Communications

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

The idea behind Luckin Coffee and Spirent Communications plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.