Correlation Between Luckin Coffee and DBS GROUP

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

By analyzing existing cross correlation between Luckin Coffee and DBS GROUP ADR4, you can compare the effects of market volatilities on Luckin Coffee and DBS GROUP 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 DBS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luckin Coffee and DBS GROUP.

Diversification Opportunities for Luckin Coffee and DBS GROUP

0.61

Correlation Coefficient

Luckin Coffee  DBS GROUP

Poor diversification

The 3 months correlation between Luckin and DBS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and DBS GROUP ADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS GROUP ADR4 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 DBS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS GROUP ADR4 has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and DBS GROUP go up and down completely randomly.

Pair Corralation between Luckin Coffee and DBS GROUP

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 2.63 times more return on investment than DBS GROUP. However, Luckin Coffee is 2.63 times more volatile than DBS GROUP ADR4. It trades about 0.19 of its potential returns per unit of risk. DBS GROUP ADR4 is currently generating about 0.05 per unit of risk. If you would invest  2,300  in Luckin Coffee on December 19, 2024 and sell it today you would earn a total of  940.00  from holding Luckin Coffee or generate 40.87% return on investment over 90 days.

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

Luckin Coffee  vs.  DBS GROUP ADR4

Luckin Coffee

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 14 (%) 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.

DBS GROUP ADR4

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DBS GROUP ADR4 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DBS GROUP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Luckin Coffee and DBS GROUP

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

The idea behind Luckin Coffee and DBS GROUP ADR4 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.