Correlation Between Luckin Coffee and ORIX

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

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

Diversification Opportunities for Luckin Coffee and ORIX

-0.31

Correlation Coefficient

Luckin Coffee  ORIX

Very good diversification

The 3 months correlation between Luckin and ORIX is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and ORIX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX 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 ORIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and ORIX go up and down completely randomly.

Pair Corralation between Luckin Coffee and ORIX

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 1.66 times more return on investment than ORIX. However, Luckin Coffee is 1.66 times more volatile than ORIX Corporation. It trades about 0.03 of its potential returns per unit of risk. ORIX Corporation is currently generating about 0.01 per unit of risk. If you would invest  2,100  in Luckin Coffee on September 19, 2024 and sell it today you would earn a total of  100.00  from holding Luckin Coffee or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Luckin Coffee  vs.  ORIX Corp.

Luckin Coffee

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 8 (%) 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.

ORIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ORIX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ORIX 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 ORIX

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

The idea behind Luckin Coffee and ORIX Corporation 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.