Correlation Between Mullen and Topaz Energy

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

By analyzing existing cross correlation between Mullen Group and Topaz Energy Corp, you can compare the effects of market volatilities on Mullen and Topaz Energy 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 Topaz Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mullen and Topaz Energy.

Diversification Opportunities for Mullen and Topaz Energy

0.79

Correlation Coefficient

Mullen  Topaz Energy

Poor diversification

The 3 months correlation between Mullen and Topaz is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Group and Topaz Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Energy Corp 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 Topaz Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Energy Corp has no effect on the direction of Mullen i.e., Mullen and Topaz Energy go up and down completely randomly.

Pair Corralation between Mullen and Topaz Energy

Assuming the 90 days trading horizon Mullen Group is expected to generate 1.23 times more return on investment than Topaz Energy. However, Mullen is 1.23 times more volatile than Topaz Energy Corp. It trades about -0.1 of its potential returns per unit of risk. Topaz Energy Corp is currently generating about -0.16 per unit of risk. If you would invest  1,429  in Mullen Group on December 28, 2024 and sell it today you would lose (139.00) from holding Mullen Group or give up 9.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Mullen Group  vs.  Topaz Energy Corp

Mullen Group

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Topaz Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Topaz Energy Corp 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 Mullen and Topaz Energy

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

The idea behind Mullen Group and Topaz Energy Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.