Correlation Between Luckin Coffee and UnitedHealth Group

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

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

Diversification Opportunities for Luckin Coffee and UnitedHealth Group

-0.19

Correlation Coefficient

Luckin Coffee  UnitedHealth Group

Good diversification

The 3 months correlation between Luckin and UnitedHealth is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Luckin Coffee and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group 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 UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Luckin Coffee i.e., Luckin Coffee and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Luckin Coffee and UnitedHealth Group

Assuming the 90 days horizon Luckin Coffee is expected to under-perform the UnitedHealth Group. In addition to that, Luckin Coffee is 2.89 times more volatile than UnitedHealth Group Incorporated. It trades about -0.02 of its total potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about 0.0 per unit of volatility. If you would invest  49,730  in UnitedHealth Group Incorporated on January 24, 2024 and sell it today you would lose (1,112) from holding UnitedHealth Group Incorporated or give up 2.24% of portfolio value over 90 days.

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

Luckin Coffee  vs.  UnitedHealth Group Incorporate

Luckin Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luckin Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Luckin Coffee is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UnitedHealth Group Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, UnitedHealth Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Luckin Coffee and UnitedHealth Group

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

The idea behind Luckin Coffee and UnitedHealth Group Incorporated 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.