Correlation Between OReilly Automotive and U Power

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

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

Diversification Opportunities for OReilly Automotive and U Power

0.08

Correlation Coefficient

OReilly Automotive  U Power

Significant diversification

The 3 months correlation between OReilly and UCAR is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and U Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Power Limited and OReilly Automotive 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 OReilly Automotive are associated (or correlated) with U Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Power Limited has no effect on the direction of OReilly Automotive i.e., OReilly Automotive and U Power go up and down completely randomly.

Pair Corralation between OReilly Automotive and U Power

Given the investment horizon of 90 days OReilly Automotive is expected to generate 1.96 times less return on investment than U Power. But when comparing it to its historical volatility, OReilly Automotive is 3.52 times less risky than U Power. It trades about 0.16 of its potential returns per unit of risk. U Power Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  619.00  in U Power Limited on September 15, 2024 and sell it today you would earn a total of  125.00  from holding U Power Limited or generate 20.19% return on investment over 90 days.

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

OReilly Automotive  vs.  U Power Limited

OReilly Automotive

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, OReilly Automotive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

U Power Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Power Limited are ranked lower than 7 (%) 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.

Pair Trading with OReilly Automotive and U Power

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

The idea behind OReilly Automotive and U Power Limited 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.