Correlation Between Luckin Coffee and MICRONIC MYDATA

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

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

Diversification Opportunities for Luckin Coffee and MICRONIC MYDATA

0.21

Correlation Coefficient

Luckin Coffee  MICRONIC MYDATA

Modest diversification

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

Pair Corralation between Luckin Coffee and MICRONIC MYDATA

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 1.83 times more return on investment than MICRONIC MYDATA. However, Luckin Coffee is 1.83 times more volatile than MICRONIC MYDATA. It trades about 0.04 of its potential returns per unit of risk. MICRONIC MYDATA is currently generating about 0.01 per unit of risk. If you would invest  2,140  in Luckin Coffee on September 26, 2024 and sell it today you would earn a total of  100.00  from holding Luckin Coffee or generate 4.67% return on investment over 90 days.

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

Luckin Coffee  vs.  MICRONIC MYDATA

Luckin Coffee

Risk-Adjusted Performance

2 of 100

Modest

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

MICRONIC MYDATA

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days MICRONIC MYDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MICRONIC MYDATA 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 MICRONIC MYDATA

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

The idea behind Luckin Coffee and MICRONIC MYDATA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.