Correlation Between CarsalesCom and U Power

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

By analyzing existing cross correlation between CarsalesCom Ltd ADR and U Power Limited, you can compare the effects of market volatilities on CarsalesCom and U Power 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 CarsalesCom with a short position of U Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarsalesCom and U Power.

Diversification Opportunities for CarsalesCom and U Power

-0.16

Correlation Coefficient

CarsalesCom  U Power

Good diversification

The 3 months correlation between CarsalesCom and UCAR is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and U Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Power Limited and CarsalesCom 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 CarsalesCom Ltd ADR are associated (or correlated) with U Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Power Limited has no effect on the direction of CarsalesCom i.e., CarsalesCom and U Power go up and down completely randomly.

Pair Corralation between CarsalesCom and U Power

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to generate 0.58 times more return on investment than U Power. However, CarsalesCom Ltd ADR is 1.72 times less risky than U Power. It trades about 0.01 of its potential returns per unit of risk. U Power Limited is currently generating about -0.02 per unit of risk. If you would invest  4,664  in CarsalesCom Ltd ADR on September 25, 2024 and sell it today you would lose (114.00) from holding CarsalesCom Ltd ADR or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  U Power Limited

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

U Power Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Power Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, U Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CarsalesCom and U Power

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

The idea behind CarsalesCom Ltd ADR and U Power Limited 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..