Correlation Between Luckin Coffee and Thai Beverage

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

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

Diversification Opportunities for Luckin Coffee and Thai Beverage

0.07

Correlation Coefficient

Luckin Coffee  Thai Beverage

Significant diversification

The 3 months correlation between Luckin and Thai is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and Thai Beverage Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage Public 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 Thai Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Beverage Public has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and Thai Beverage go up and down completely randomly.

Pair Corralation between Luckin Coffee and Thai Beverage

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 1.26 times more return on investment than Thai Beverage. However, Luckin Coffee is 1.26 times more volatile than Thai Beverage Public. It trades about 0.06 of its potential returns per unit of risk. Thai Beverage Public is currently generating about 0.07 per unit of risk. If you would invest  1,800  in Luckin Coffee on September 3, 2024 and sell it today you would earn a total of  220.00  from holding Luckin Coffee or generate 12.22% 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.  Thai Beverage Public

Luckin Coffee

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Luckin Coffee are ranked lower than 4 (%) 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.

Thai Beverage Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Beverage Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Thai Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luckin Coffee and Thai Beverage

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

The idea behind Luckin Coffee and Thai Beverage Public 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.