Correlation Between U Power and Asbury Automotive

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

Diversification Opportunities for U Power and Asbury Automotive

-0.26

Correlation Coefficient

U Power  Asbury Automotive

Very good diversification

The 3 months correlation between UCAR and Asbury is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury 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 Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of U Power i.e., U Power and Asbury Automotive go up and down completely randomly.

Pair Corralation between U Power and Asbury Automotive

Given the investment horizon of 90 days U Power Limited is expected to generate 67.39 times more return on investment than Asbury Automotive. However, U Power is 67.39 times more volatile than Asbury Automotive Group. It trades about 0.11 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.13 per unit of risk. If you would invest  1,018  in U Power Limited on February 20, 2024 and sell it today you would lose (404.26) from holding U Power Limited or give up 39.71% of portfolio value over 90 days.

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

U Power Limited  vs.  Asbury Automotive Group

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 unfluctuating basic indicators, U Power reported solid returns over the last few months and may actually be approaching a breakup point.

Asbury Automotive

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Asbury Automotive reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Power and Asbury Automotive

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

The idea behind U Power Limited and Asbury Automotive Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.