Correlation Between U Power and Arrow Electronics

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

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

Diversification Opportunities for U Power and Arrow Electronics

0.17

Correlation Coefficient

U Power  Arrow Electronics

Average diversification

The 3 months correlation between UCAR and Arrow is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and U Power 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 U Power Limited are associated (or correlated) with Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of U Power i.e., U Power and Arrow Electronics go up and down completely randomly.

Pair Corralation between U Power and Arrow Electronics

Given the investment horizon of 90 days U Power Limited is expected to generate 32.2 times more return on investment than Arrow Electronics. However, U Power is 32.2 times more volatile than Arrow Electronics. It trades about 0.03 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.03 per unit of risk. If you would invest  56,300  in U Power Limited on October 12, 2024 and sell it today you would lose (55,640) from holding U Power Limited or give up 98.83% of portfolio value over 90 days.

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

U Power Limited  vs.  Arrow Electronics

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.

Arrow Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with U Power and Arrow Electronics

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

The idea behind U Power Limited and Arrow Electronics 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 Global Correlations module to find global opportunities by holding instruments from different markets.