Correlation Between Luckin Coffee and Yanzhou Coal

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

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

Diversification Opportunities for Luckin Coffee and Yanzhou Coal

0.45

Correlation Coefficient

Luckin Coffee  Yanzhou Coal

Very weak diversification

The 3 months correlation between Luckin and Yanzhou is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and Yanzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yanzhou Coal Mining 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 Yanzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yanzhou Coal Mining has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and Yanzhou Coal go up and down completely randomly.

Pair Corralation between Luckin Coffee and Yanzhou Coal

Assuming the 90 days trading horizon Luckin Coffee is expected to generate 1.15 times more return on investment than Yanzhou Coal. However, Luckin Coffee is 1.15 times more volatile than Yanzhou Coal Mining. It trades about 0.04 of its potential returns per unit of risk. Yanzhou Coal Mining 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	Weak
Accuracy	100.0%
Values	Daily Returns

Luckin Coffee  vs.  Yanzhou Coal Mining

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

Yanzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yanzhou Coal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Yanzhou Coal is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Luckin Coffee and Yanzhou Coal

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

The idea behind Luckin Coffee and Yanzhou Coal Mining 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.