Correlation Between U Power and Carvana

Can any of the company-specific risk be diversified away by investing in both U Power and Carvana 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 Carvana 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 Carvana Co, you can compare the effects of market volatilities on U Power and Carvana 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 Carvana. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Power and Carvana.

Diversification Opportunities for U Power and Carvana

-0.09

Correlation Coefficient

U Power  Carvana

Good diversification

The 3 months correlation between UCAR and Carvana is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana 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 Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of U Power i.e., U Power and Carvana go up and down completely randomly.

Pair Corralation between U Power and Carvana

Given the investment horizon of 90 days U Power Limited is expected to under-perform the Carvana. In addition to that, U Power is 1.67 times more volatile than Carvana Co. It trades about -0.13 of its total potential returns per unit of risk. Carvana Co is currently generating about 0.02 per unit of volatility. If you would invest  21,055  in Carvana Co on December 28, 2024 and sell it today you would lose (660.00) from holding Carvana Co or give up 3.13% of portfolio value over 90 days.

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

U Power Limited  vs.  Carvana Co

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.

Carvana

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Carvana is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with U Power and Carvana

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

The idea behind U Power Limited and Carvana Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.