Correlation Between U Power and Rivian Automotive

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

Diversification Opportunities for U Power and Rivian Automotive

-0.46

Correlation Coefficient

U Power  Rivian Automotive

Very good diversification

The 3 months correlation between UCAR and Rivian is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding U Power Limited and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian 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 Rivian Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivian Automotive has no effect on the direction of U Power i.e., U Power and Rivian Automotive go up and down completely randomly.

Pair Corralation between U Power and Rivian Automotive

Given the investment horizon of 90 days U Power Limited is expected to generate 0.97 times more return on investment than Rivian Automotive. However, U Power Limited is 1.03 times less risky than Rivian Automotive. It trades about -0.01 of its potential returns per unit of risk. Rivian Automotive is currently generating about -0.03 per unit of risk. If you would invest  696.00  in U Power Limited on September 5, 2024 and sell it today you would lose (52.00) from holding U Power Limited or give up 7.47% of portfolio value over 90 days.

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

U Power Limited  vs.  Rivian Automotive

U Power Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days U Power Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, U Power is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Rivian Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rivian Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with U Power and Rivian Automotive

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

The idea behind U Power Limited and Rivian Automotive 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.