Correlation Between Great Wall and Mullen Automotive

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

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

Diversification Opportunities for Great Wall and Mullen Automotive

-0.6

Correlation Coefficient

Great Wall  Mullen Automotive

Excellent diversification

The 3 months correlation between Great and Mullen is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Motor and Mullen Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mullen Automotive and Great Wall 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 Great Wall Motor 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 Great Wall i.e., Great Wall and Mullen Automotive go up and down completely randomly.

Pair Corralation between Great Wall and Mullen Automotive

Assuming the 90 days horizon Great Wall Motor is expected to generate 0.7 times more return on investment than Mullen Automotive. However, Great Wall Motor is 1.42 times less risky than Mullen Automotive. It trades about 0.03 of its potential returns per unit of risk. Mullen Automotive is currently generating about -0.26 per unit of risk. If you would invest  1,799  in Great Wall Motor on September 16, 2024 and sell it today you would earn a total of  1.00  from holding Great Wall Motor or generate 0.06% return on investment over 90 days.

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

Great Wall Motor  vs.  Mullen Automotive

Great Wall Motor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Motor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Great Wall showed 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 Great Wall and Mullen Automotive

The main advantage of trading using opposite Great Wall and Mullen Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall 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 Great Wall Motor 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.