Correlation Between PACCAR and U Power

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

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

Diversification Opportunities for PACCAR and U Power

-0.07

Correlation Coefficient

PACCAR  U Power

Good diversification

The 3 months correlation between PACCAR and UCAR is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR 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 PACCAR 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 PACCAR 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 PACCAR i.e., PACCAR and U Power go up and down completely randomly.

Pair Corralation between PACCAR and U Power

Given the investment horizon of 90 days PACCAR is expected to generate 58.81 times less return on investment than U Power. But when comparing it to its historical volatility, PACCAR Inc is 39.16 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 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,835  in U Power Limited on September 24, 2024 and sell it today you would lose (1,197) from holding U Power Limited or give up 65.23% of portfolio value over 90 days.

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

PACCAR Inc  vs.  U Power Limited

PACCAR Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, PACCAR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

U Power Limited

Risk-Adjusted Performance

0 of 100

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 relatively invariable basic indicators, U Power is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with PACCAR and U Power

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

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.