Correlation Between Luckin Coffee and Take Two

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

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

Diversification Opportunities for Luckin Coffee and Take Two

-0.04

Correlation Coefficient

Luckin Coffee  Take Two

Good diversification

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

Pair Corralation between Luckin Coffee and Take Two

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 2.76 times more return on investment than Take Two. However, Luckin Coffee is 2.76 times more volatile than Take Two Interactive Software. It trades about 0.13 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.27 per unit of risk. If you would invest  2,140  in Luckin Coffee on October 7, 2024 and sell it today you would earn a total of  400.00  from holding Luckin Coffee or generate 18.69% 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.  Take Two Interactive Software

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 unsteady basic indicators, Luckin Coffee may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Take Two Interactive

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Take Two reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luckin Coffee and Take Two

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

The idea behind Luckin Coffee and Take Two Interactive Software 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..