Correlation Between U Power and Volaris

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

Diversification Opportunities for U Power and Volaris

-0.03

Correlation Coefficient

U Power  Volaris

Good diversification

The 3 months correlation between UCAR and Volaris is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris 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 Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of U Power i.e., U Power and Volaris go up and down completely randomly.

Pair Corralation between U Power and Volaris

Given the investment horizon of 90 days U Power Limited is expected to generate 2.65 times more return on investment than Volaris. However, U Power is 2.65 times more volatile than Volaris. It trades about 0.14 of its potential returns per unit of risk. Volaris is currently generating about 0.18 per unit of risk. If you would invest  617.00  in U Power Limited on October 25, 2024 and sell it today you would earn a total of  161.00  from holding U Power Limited or generate 26.09% 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.  Volaris

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.

Volaris

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Power and Volaris

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

The idea behind U Power Limited and Volaris 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.