Correlation Between Uber Technologies and PACCAR

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

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

Diversification Opportunities for Uber Technologies and PACCAR

-0.19

Correlation Coefficient

Uber Technologies  PACCAR

Good diversification

The 3 months correlation between Uber and PACCAR is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Uber Technologies and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Uber Technologies 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 Uber Technologies are associated (or correlated) with PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Uber Technologies i.e., Uber Technologies and PACCAR go up and down completely randomly.

Pair Corralation between Uber Technologies and PACCAR

Given the investment horizon of 90 days Uber Technologies is expected to generate 1.53 times more return on investment than PACCAR. However, Uber Technologies is 1.53 times more volatile than PACCAR Inc. It trades about 0.14 of its potential returns per unit of risk. PACCAR Inc is currently generating about -0.05 per unit of risk. If you would invest  6,113  in Uber Technologies on December 27, 2024 and sell it today you would earn a total of  1,373  from holding Uber Technologies or generate 22.46% return on investment over 90 days.

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

Uber Technologies  vs.  PACCAR Inc

Uber Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Uber Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Uber Technologies and PACCAR

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

The idea behind Uber Technologies and PACCAR Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.