Correlation Between VULCAN MATERIALS and Luckin Coffee

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

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

Diversification Opportunities for VULCAN MATERIALS and Luckin Coffee

-0.21

Correlation Coefficient

VULCAN MATERIALS  Luckin Coffee

Very good diversification

The 3 months correlation between VULCAN and Luckin is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding VULCAN MATERIALS and Luckin Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luckin Coffee and VULCAN MATERIALS 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 VULCAN MATERIALS are associated (or correlated) with Luckin Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luckin Coffee has no effect on the direction of VULCAN MATERIALS i.e., VULCAN MATERIALS and Luckin Coffee go up and down completely randomly.

Pair Corralation between VULCAN MATERIALS and Luckin Coffee

Assuming the 90 days trading horizon VULCAN MATERIALS is expected to generate 0.39 times more return on investment than Luckin Coffee. However, VULCAN MATERIALS is 2.56 times less risky than Luckin Coffee. It trades about 0.07 of its potential returns per unit of risk. Luckin Coffee is currently generating about 0.0 per unit of risk. If you would invest  19,309  in VULCAN MATERIALS on October 21, 2024 and sell it today you would earn a total of  7,091  from holding VULCAN MATERIALS or generate 36.72% return on investment over 90 days.

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

VULCAN MATERIALS  vs.  Luckin Coffee

VULCAN MATERIALS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VULCAN MATERIALS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, VULCAN MATERIALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 uncertain basic indicators, Luckin Coffee unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VULCAN MATERIALS and Luckin Coffee

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

The idea behind VULCAN MATERIALS and Luckin Coffee 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 Global Correlations module to find global opportunities by holding instruments from different markets.