Correlation Between Dana and U Power
Can any of the company-specific risk be diversified away by investing in both Dana 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 Dana and U Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dana Inc and U Power Limited, you can compare the effects of market volatilities on Dana 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 Dana with a short position of U Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and U Power.
Diversification Opportunities for Dana and U Power
Good diversification
The 3 months correlation between Dana and UCAR is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc 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 Dana 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 Dana Inc 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 Dana i.e., Dana and U Power go up and down completely randomly.
Pair Corralation between Dana and U Power
Considering the 90-day investment horizon Dana Inc is expected to generate 1.02 times more return on investment than U Power. However, Dana is 1.02 times more volatile than U Power Limited. It trades about 0.12 of its potential returns per unit of risk. U Power Limited is currently generating about 0.09 per unit of risk. If you would invest 985.00 in Dana Inc on September 15, 2024 and sell it today you would earn a total of 283.00 from holding Dana Inc or generate 28.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Dana Inc vs. U Power Limited
Performance |
Timeline |
Dana Inc |
U Power Limited |
Dana and U Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dana and U Power
The main advantage of trading using opposite Dana and U Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana 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 Dana Inc 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.U Power vs. AutoNation | ||
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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