Correlation Between Lithia Motors and U Power
Can any of the company-specific risk be diversified away by investing in both Lithia Motors 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 Lithia Motors and U Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and U Power Limited, you can compare the effects of market volatilities on Lithia Motors 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 Lithia Motors with a short position of U Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and U Power.
Diversification Opportunities for Lithia Motors and U Power
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lithia and UCAR is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors 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 Lithia Motors 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 Lithia Motors 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 Lithia Motors i.e., Lithia Motors and U Power go up and down completely randomly.
Pair Corralation between Lithia Motors and U Power
Considering the 90-day investment horizon Lithia Motors is expected to generate 10.46 times less return on investment than U Power. But when comparing it to its historical volatility, Lithia Motors is 22.47 times less risky than U Power. It trades about 0.06 of its potential returns per unit of risk. U Power Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 79,000 in U Power Limited on August 31, 2024 and sell it today you would lose (78,368) from holding U Power Limited or give up 99.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. U Power Limited
Performance |
| Timeline |
| Lithia Motors |
| U Power Limited |
Lithia Motors and U Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and U Power
The main advantage of trading using opposite Lithia Motors and U Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors 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.| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
| U Power vs. Kaixin Auto Holdings | U Power vs. Uxin | U Power vs. SunCar Technology Group | U Power vs. Carvana Co |
Check out your portfolio center.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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