Correlation Between U Power and BBB Foods
Can any of the company-specific risk be diversified away by investing in both U Power and BBB Foods 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 BBB Foods 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 BBB Foods, you can compare the effects of market volatilities on U Power and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Power and BBB Foods.
Diversification Opportunities for U Power and BBB Foods
Weak diversification
The 3 months correlation between UCAR and BBB is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of U Power i.e., U Power and BBB Foods go up and down completely randomly.
Pair Corralation between U Power and BBB Foods
Given the investment horizon of 90 days U Power Limited is expected to generate 20.58 times more return on investment than BBB Foods. However, U Power is 20.58 times more volatile than BBB Foods. It trades about 0.05 of its potential returns per unit of risk. BBB Foods is currently generating about 0.09 per unit of risk. If you would invest 3,900 in U Power Limited on September 3, 2024 and sell it today you would lose (3,268) from holding U Power Limited or give up 83.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 83.4% |
| Values | Daily Returns |
U Power Limited vs. BBB Foods
Performance |
| Timeline |
| U Power Limited |
| BBB Foods |
U Power and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Power and BBB Foods
The main advantage of trading using opposite U Power and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Power position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| U Power vs. Kaixin Auto Holdings | U Power vs. Uxin | U Power vs. SunCar Technology Group | U Power vs. Carvana Co |
| BBB Foods vs. NetSol Technologies | BBB Foods vs. Analog Devices | BBB Foods vs. FARO Technologies | BBB Foods vs. Getty Images Holdings |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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