Correlation Between Mullen and Hammond Power

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

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

Diversification Opportunities for Mullen and Hammond Power

0.31

Correlation Coefficient

Mullen  Hammond Power

Weak diversification

The 3 months correlation between Mullen and Hammond is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Group and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions and Mullen 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 Mullen Group are associated (or correlated) with Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of Mullen i.e., Mullen and Hammond Power go up and down completely randomly.

Pair Corralation between Mullen and Hammond Power

Assuming the 90 days trading horizon Mullen Group is expected to generate 0.52 times more return on investment than Hammond Power. However, Mullen Group is 1.91 times less risky than Hammond Power. It trades about 0.04 of its potential returns per unit of risk. Hammond Power Solutions is currently generating about -0.13 per unit of risk. If you would invest  1,469  in Mullen Group on October 24, 2024 and sell it today you would earn a total of  13.00  from holding Mullen Group or generate 0.88% return on investment over 90 days.

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

Mullen Group  vs.  Hammond Power Solutions

Mullen Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mullen Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Mullen is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hammond Power Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hammond Power Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Mullen and Hammond Power

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

The idea behind Mullen Group and Hammond Power Solutions 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.