Correlation Between Mullen Automotive and BYD Co

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

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

Diversification Opportunities for Mullen Automotive and BYD Co

-0.58

Correlation Coefficient

Mullen Automotive  BYD Co

Excellent diversification

The 3 months correlation between Mullen and BYD is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Automotive and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Mullen Automotive 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 Automotive are associated (or correlated) with BYD Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Co has no effect on the direction of Mullen Automotive i.e., Mullen Automotive and BYD Co go up and down completely randomly.

Pair Corralation between Mullen Automotive and BYD Co

Given the investment horizon of 90 days Mullen Automotive is expected to under-perform the BYD Co. In addition to that, Mullen Automotive is 5.42 times more volatile than BYD Co Ltd. It trades about -0.15 of its total potential returns per unit of risk. BYD Co Ltd is currently generating about 0.04 per unit of volatility. If you would invest  4,818  in BYD Co Ltd on September 20, 2024 and sell it today you would earn a total of  2,081  from holding BYD Co Ltd or generate 43.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Mullen Automotive  vs.  BYD Co Ltd

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.

BYD Co

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, BYD Co showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mullen Automotive and BYD Co

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

The idea behind Mullen Automotive and BYD Co Ltd 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.