Correlation Between Mullen Automotive and Nio

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

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

Diversification Opportunities for Mullen Automotive and Nio

-0.43

Correlation Coefficient

Mullen Automotive  Nio

Very good diversification

The 3 months correlation between Mullen and Nio is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Automotive and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Mullen Automotive i.e., Mullen Automotive and Nio go up and down completely randomly.

Pair Corralation between Mullen Automotive and Nio

Given the investment horizon of 90 days Mullen Automotive is expected to generate 4.79 times more return on investment than Nio. However, Mullen Automotive is 4.79 times more volatile than Nio Class A. It trades about 0.11 of its potential returns per unit of risk. Nio Class A is currently generating about -0.27 per unit of risk. If you would invest  231.00  in Mullen Automotive on August 30, 2024 and sell it today you would earn a total of  37.00  from holding Mullen Automotive or generate 16.02% return on investment over 90 days.

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

Mullen Automotive  vs.  Nio Class A

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 December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nio Class A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Nio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mullen Automotive and Nio

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

The idea behind Mullen Automotive and Nio Class A 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .