Correlation Between KAR Auction and U Power

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

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

Diversification Opportunities for KAR Auction and U Power

-0.59

Correlation Coefficient

KAR Auction  U Power

Excellent diversification

The 3 months correlation between KAR and UCAR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services 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 KAR Auction 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 KAR Auction Services 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 KAR Auction i.e., KAR Auction and U Power go up and down completely randomly.

Pair Corralation between KAR Auction and U Power

Considering the 90-day investment horizon KAR Auction Services is expected to generate 0.21 times more return on investment than U Power. However, KAR Auction Services is 4.77 times less risky than U Power. It trades about 0.04 of its potential returns per unit of risk. U Power Limited is currently generating about -0.13 per unit of risk. If you would invest  2,045  in KAR Auction Services on December 26, 2024 and sell it today you would earn a total of  67.00  from holding KAR Auction Services or generate 3.28% return on investment over 90 days.

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

KAR Auction Services  vs.  U Power Limited

KAR Auction Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KAR Auction Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, KAR Auction is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

U Power Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days U Power Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with KAR Auction and U Power

The main advantage of trading using opposite KAR Auction and U Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction 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 KAR Auction Services 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.