Correlation Between U Power and Lithia Motors
Can any of the company-specific risk be diversified away by investing in both U Power and Lithia Motors 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 Lithia Motors 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 Lithia Motors, you can compare the effects of market volatilities on U Power and Lithia Motors 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 Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Power and Lithia Motors.
Diversification Opportunities for U Power and Lithia Motors
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between UCAR and Lithia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors 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 Lithia Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithia Motors has no effect on the direction of U Power i.e., U Power and Lithia Motors go up and down completely randomly.
Pair Corralation between U Power and Lithia Motors
Given the investment horizon of 90 days U Power Limited is expected to under-perform the Lithia Motors. In addition to that, U Power is 2.38 times more volatile than Lithia Motors. It trades about -0.22 of its total potential returns per unit of risk. Lithia Motors is currently generating about 0.38 per unit of volatility. If you would invest 33,876 in Lithia Motors on August 28, 2024 and sell it today you would earn a total of 5,551 from holding Lithia Motors or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Power Limited vs. Lithia Motors
Performance |
| Timeline |
| U Power Limited |
| Lithia Motors |
U Power and Lithia Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Power and Lithia Motors
The main advantage of trading using opposite U Power and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Power position performs unexpectedly, Lithia Motors 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 Lithia Motors will offset losses from the drop in Lithia Motors' long position.| U Power vs. Kingsway Financial Services | U Power vs. KAR Auction Services | U Power vs. Cango Inc | U Power vs. Vroom Inc |
| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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