Correlation Between Choice Hotels and Mullen Automotive

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

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

Diversification Opportunities for Choice Hotels and Mullen Automotive

-0.61

Correlation Coefficient

Choice Hotels  Mullen Automotive

Excellent diversification

The 3 months correlation between Choice and Mullen is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Mullen Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mullen Automotive and Choice Hotels 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 Choice Hotels International are associated (or correlated) with Mullen Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mullen Automotive has no effect on the direction of Choice Hotels i.e., Choice Hotels and Mullen Automotive go up and down completely randomly.

Pair Corralation between Choice Hotels and Mullen Automotive

Considering the 90-day investment horizon Choice Hotels International is expected to generate 0.12 times more return on investment than Mullen Automotive. However, Choice Hotels International is 8.42 times less risky than Mullen Automotive. It trades about 0.17 of its potential returns per unit of risk. Mullen Automotive is currently generating about -0.17 per unit of risk. If you would invest  12,502  in Choice Hotels International on September 14, 2024 and sell it today you would earn a total of  2,138  from holding Choice Hotels International or generate 17.1% return on investment over 90 days.

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

Choice Hotels International  vs.  Mullen Automotive

Choice Hotels Intern

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Choice Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Mullen Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mullen Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Choice Hotels and Mullen Automotive

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

The idea behind Choice Hotels International and Mullen 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.