Correlation Between Mullen Automotive and Great Wall

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

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

Diversification Opportunities for Mullen Automotive and Great Wall

-0.6

Correlation Coefficient

Mullen Automotive  Great Wall

Excellent diversification

The 3 months correlation between Mullen and Great is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Automotive and Great Wall Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Motor 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 Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Motor has no effect on the direction of Mullen Automotive i.e., Mullen Automotive and Great Wall go up and down completely randomly.

Pair Corralation between Mullen Automotive and Great Wall

Given the investment horizon of 90 days Mullen Automotive is expected to under-perform the Great Wall. In addition to that, Mullen Automotive is 2.72 times more volatile than Great Wall Motor. It trades about -0.18 of its total potential returns per unit of risk. Great Wall Motor is currently generating about 0.1 per unit of volatility. If you would invest  1,414  in Great Wall Motor on September 16, 2024 and sell it today you would earn a total of  386.00  from holding Great Wall Motor or generate 27.3% return on investment over 90 days.

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

Mullen Automotive  vs.  Great Wall Motor

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.

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.

Pair Trading with Mullen Automotive and Great Wall

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

The idea behind Mullen Automotive and Great Wall Motor 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.