Correlation Between Luckin Coffee and Bank of America

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

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

Diversification Opportunities for Luckin Coffee and Bank of America

-0.03

Correlation Coefficient

Luckin Coffee  Bank of America

Good diversification

The 3 months correlation between Luckin and Bank is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and Bank of America go up and down completely randomly.

Pair Corralation between Luckin Coffee and Bank of America

If you would invest  2,280  in Luckin Coffee on October 27, 2024 and sell it today you would earn a total of  280.00  from holding Luckin Coffee or generate 12.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Luckin Coffee  vs.  Bank of America

Luckin Coffee

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Luckin Coffee unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bank of America

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Bank of America reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luckin Coffee and Bank of America

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

The idea behind Luckin Coffee and Bank of America 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.