Correlation Between U Power and Sonic Automotive
Can any of the company-specific risk be diversified away by investing in both U Power and Sonic Automotive 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 Sonic Automotive 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 Sonic Automotive, you can compare the effects of market volatilities on U Power and Sonic Automotive 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 Sonic Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Power and Sonic Automotive.
Diversification Opportunities for U Power and Sonic Automotive
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between UCAR and Sonic is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Sonic Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Automotive 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 Sonic Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonic Automotive has no effect on the direction of U Power i.e., U Power and Sonic Automotive go up and down completely randomly.
Pair Corralation between U Power and Sonic Automotive
Given the investment horizon of 90 days U Power Limited is expected to under-perform the Sonic Automotive. In addition to that, U Power is 2.71 times more volatile than Sonic Automotive. It trades about -0.13 of its total potential returns per unit of risk. Sonic Automotive is currently generating about -0.22 per unit of volatility. If you would invest 7,310 in Sonic Automotive on December 10, 2024 and sell it today you would lose (650.00) from holding Sonic Automotive or give up 8.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Power Limited vs. Sonic Automotive
Performance |
| Timeline |
| U Power Limited |
| Sonic Automotive |
U Power and Sonic Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Power and Sonic Automotive
The main advantage of trading using opposite U Power and Sonic Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Power position performs unexpectedly, Sonic Automotive 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 Sonic Automotive will offset losses from the drop in Sonic Automotive's long position.| U Power vs. Kaixin Auto Holdings | ||
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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