Correlation Between U Power and Carvana

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

Diversification Opportunities for U Power and Carvana

-0.76

Correlation Coefficient

U Power  Carvana

Pay attention - limited upside

The 3 months correlation between UCAR and Carvana is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana 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 Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of U Power i.e., U Power and Carvana go up and down completely randomly.

Pair Corralation between U Power and Carvana

Given the investment horizon of 90 days U Power Limited is expected to generate 59.7 times more return on investment than Carvana. However, U Power is 59.7 times more volatile than Carvana Co. It trades about 0.21 of its potential returns per unit of risk. Carvana Co is currently generating about -0.02 per unit of risk. If you would invest  6.20  in U Power Limited on January 30, 2024 and sell it today you would earn a total of  505.80  from holding U Power Limited or generate 8158.06% return on investment over 90 days.

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

U Power Limited  vs.  Carvana Co

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.

Carvana

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Carvana sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Power and Carvana

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

The idea behind U Power Limited and Carvana Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.