Correlation Between SunCar Technology and U Power

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

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

Diversification Opportunities for SunCar Technology and U Power

0.16

Correlation Coefficient

SunCar Technology  U Power

Average diversification

The 3 months correlation between SunCar and UCAR is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding SunCar Technology Group and U Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Power Limited and SunCar Technology 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 SunCar Technology Group are associated (or correlated) with U Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Power Limited has no effect on the direction of SunCar Technology i.e., SunCar Technology and U Power go up and down completely randomly.

Pair Corralation between SunCar Technology and U Power

Considering the 90-day investment horizon SunCar Technology is expected to generate 67.73 times less return on investment than U Power. But when comparing it to its historical volatility, SunCar Technology Group is 50.14 times less risky than U Power. It trades about 0.16 of its potential returns per unit of risk. U Power Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6.20  in U Power Limited on January 31, 2024 and sell it today you would earn a total of  548.80  from holding U Power Limited or generate 8851.61% return on investment over 90 days.

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

SunCar Technology Group  vs.  U Power Limited

SunCar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SunCar Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, SunCar Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

U Power Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Power Limited are ranked lower than 8 (%) 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.

Pair Trading with SunCar Technology and U Power

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

The idea behind SunCar Technology Group and U Power Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.