Correlation Between Kuaishou Technology and TrueCar

Can any of the company-specific risk be diversified away by investing in both Kuaishou Technology and TrueCar 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 Kuaishou Technology and TrueCar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kuaishou Technology and TrueCar, you can compare the effects of market volatilities on Kuaishou Technology and TrueCar 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 Kuaishou Technology with a short position of TrueCar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuaishou Technology and TrueCar.

Diversification Opportunities for Kuaishou Technology and TrueCar

0.3

Correlation Coefficient

Kuaishou Technology  TrueCar

Weak diversification

The 3 months correlation between Kuaishou and TrueCar is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kuaishou Technology and TrueCar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueCar and Kuaishou Technology 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 Kuaishou Technology are associated (or correlated) with TrueCar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueCar has no effect on the direction of Kuaishou Technology i.e., Kuaishou Technology and TrueCar go up and down completely randomly.

Pair Corralation between Kuaishou Technology and TrueCar

Assuming the 90 days horizon Kuaishou Technology is expected to generate 2.09 times less return on investment than TrueCar. In addition to that, Kuaishou Technology is 1.42 times more volatile than TrueCar. It trades about 0.07 of its total potential returns per unit of risk. TrueCar is currently generating about 0.22 per unit of volatility. If you would invest  289.00  in TrueCar on September 3, 2024 and sell it today you would earn a total of  137.00  from holding TrueCar or generate 47.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Kuaishou Technology  vs.  TrueCar

Kuaishou Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kuaishou Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kuaishou Technology reported solid returns over the last few months and may actually be approaching a breakup point.

TrueCar

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TrueCar are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, TrueCar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuaishou Technology and TrueCar

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

The idea behind Kuaishou Technology and TrueCar 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.