Correlation Between UTime and Cavco Industries

Can any of the company-specific risk be diversified away by investing in both UTime and Cavco Industries 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 UTime and Cavco Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UTime Limited and Cavco Industries, you can compare the effects of market volatilities on UTime and Cavco Industries 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 UTime with a short position of Cavco Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of UTime and Cavco Industries.

Diversification Opportunities for UTime and Cavco Industries

-0.5

Correlation Coefficient

UTime  Cavco Industries

Very good diversification

The 3 months correlation between UTime and Cavco is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding UTime Limited and Cavco Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavco Industries and UTime 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 UTime Limited are associated (or correlated) with Cavco Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavco Industries has no effect on the direction of UTime i.e., UTime and Cavco Industries go up and down completely randomly.

Pair Corralation between UTime and Cavco Industries

Considering the 90-day investment horizon UTime Limited is expected to under-perform the Cavco Industries. In addition to that, UTime is 5.4 times more volatile than Cavco Industries. It trades about -0.05 of its total potential returns per unit of risk. Cavco Industries is currently generating about 0.15 per unit of volatility. If you would invest  34,401  in Cavco Industries on September 5, 2024 and sell it today you would earn a total of  16,772  from holding Cavco Industries or generate 48.75% return on investment over 90 days.

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

UTime Limited  vs.  Cavco Industries

UTime Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UTime Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cavco Industries

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with UTime and Cavco Industries

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

The idea behind UTime Limited and Cavco Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.