Correlation Between U Power and Griffon

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

Diversification Opportunities for U Power and Griffon

-0.45

Correlation Coefficient

U Power  Griffon

Very good diversification

The 3 months correlation between UCAR and Griffon is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon 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 Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon has no effect on the direction of U Power i.e., U Power and Griffon go up and down completely randomly.

Pair Corralation between U Power and Griffon

Given the investment horizon of 90 days U Power is expected to generate 2.04 times less return on investment than Griffon. In addition to that, U Power is 1.72 times more volatile than Griffon. It trades about 0.04 of its total potential returns per unit of risk. Griffon is currently generating about 0.12 per unit of volatility. If you would invest  6,422  in Griffon on October 26, 2024 and sell it today you would earn a total of  1,391  from holding Griffon or generate 21.66% return on investment over 90 days.

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

U Power Limited  vs.  Griffon

U Power Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Power Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, U Power may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Griffon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Griffon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Power and Griffon

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

The idea behind U Power Limited and Griffon 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.