Correlation Between U Power and Tesla

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

Diversification Opportunities for U Power and Tesla

-0.06

Correlation Coefficient

U Power  Tesla

Good diversification

The 3 months correlation between UCAR and Tesla is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of U Power i.e., U Power and Tesla go up and down completely randomly.

Pair Corralation between U Power and Tesla

Given the investment horizon of 90 days U Power is expected to generate 4.73 times less return on investment than Tesla. In addition to that, U Power is 1.03 times more volatile than Tesla Inc. It trades about 0.03 of its total potential returns per unit of risk. Tesla Inc is currently generating about 0.17 per unit of volatility. If you would invest  18,744  in Tesla Inc on September 14, 2024 and sell it today you would earn a total of  23,066  from holding Tesla Inc or generate 123.06% 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.  Tesla Inc

U Power Limited

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in U Power Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, U Power reported solid returns over the last few months and may actually be approaching a breakup point.

Tesla Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Power and Tesla

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

The idea behind U Power Limited and Tesla 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.