Correlation Between Penske Automotive and U Power

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

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

Diversification Opportunities for Penske Automotive and U Power

-0.53

Correlation Coefficient

Penske Automotive  U Power

Excellent diversification

The 3 months correlation between Penske and UCAR is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Penske Automotive Group 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 Penske Automotive 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 Penske Automotive Group 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 Penske Automotive i.e., Penske Automotive and U Power go up and down completely randomly.

Pair Corralation between Penske Automotive and U Power

Considering the 90-day investment horizon Penske Automotive Group is expected to under-perform the U Power. But the stock apears to be less risky and, when comparing its historical volatility, Penske Automotive Group is 4.94 times less risky than U Power. The stock trades about -0.42 of its potential returns per unit of risk. The U Power Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  714.00  in U Power Limited on October 8, 2024 and sell it today you would earn a total of  83.00  from holding U Power Limited or generate 11.62% return on investment over 90 days.

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

Penske Automotive Group  vs.  U Power Limited

Penske Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

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

U Power Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in U Power Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, U Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penske Automotive and U Power

The main advantage of trading using opposite Penske Automotive and U Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penske Automotive 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 Penske Automotive Group 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.