Correlation Between U Power and PACCAR

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

Diversification Opportunities for U Power and PACCAR

-0.07

Correlation Coefficient

U Power  PACCAR

Good diversification

The 3 months correlation between UCAR and PACCAR is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 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 U Power i.e., U Power and PACCAR go up and down completely randomly.

Pair Corralation between U Power and PACCAR

Given the investment horizon of 90 days U Power Limited is expected to generate 3.74 times more return on investment than PACCAR. However, U Power is 3.74 times more volatile than PACCAR Inc. It trades about 0.1 of its potential returns per unit of risk. PACCAR Inc is currently generating about -0.33 per unit of risk. If you would invest  617.00  in U Power Limited on September 24, 2024 and sell it today you would earn a total of  43.00  from holding U Power Limited or generate 6.97% return on investment over 90 days.

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

U Power Limited  vs.  PACCAR Inc

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.

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.

Pair Trading with U Power and PACCAR

The main advantage of trading using opposite U Power and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Power 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 U Power Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.