Correlation Between Luckin Coffee and TOWNSQUARE MEDIA

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

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

Diversification Opportunities for Luckin Coffee and TOWNSQUARE MEDIA

0.17

Correlation Coefficient

Luckin Coffee  TOWNSQUARE MEDIA

Average diversification

The 3 months correlation between Luckin and TOWNSQUARE is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and TOWNSQUARE MEDIA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOWNSQUARE MEDIA INC 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 TOWNSQUARE MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOWNSQUARE MEDIA INC has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and TOWNSQUARE MEDIA go up and down completely randomly.

Pair Corralation between Luckin Coffee and TOWNSQUARE MEDIA

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 2.65 times more return on investment than TOWNSQUARE MEDIA. However, Luckin Coffee is 2.65 times more volatile than TOWNSQUARE MEDIA INC. It trades about 0.1 of its potential returns per unit of risk. TOWNSQUARE MEDIA INC is currently generating about 0.01 per unit of risk. If you would invest  1,830  in Luckin Coffee on September 21, 2024 and sell it today you would earn a total of  470.00  from holding Luckin Coffee or generate 25.68% return on investment over 90 days.

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

Luckin Coffee  vs.  TOWNSQUARE MEDIA INC

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.

TOWNSQUARE MEDIA INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOWNSQUARE MEDIA INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TOWNSQUARE MEDIA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Luckin Coffee and TOWNSQUARE MEDIA

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

The idea behind Luckin Coffee and TOWNSQUARE MEDIA INC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.