Correlation Between Mullen Automotive and Toyota

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

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

Diversification Opportunities for Mullen Automotive and Toyota

0.18

Correlation Coefficient

Mullen Automotive  Toyota

Average diversification

The 3 months correlation between Mullen and Toyota is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Automotive and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor has no effect on the direction of Mullen Automotive i.e., Mullen Automotive and Toyota go up and down completely randomly.

Pair Corralation between Mullen Automotive and Toyota

Given the investment horizon of 90 days Mullen Automotive is expected to under-perform the Toyota. In addition to that, Mullen Automotive is 8.17 times more volatile than Toyota Motor. It trades about -0.15 of its total potential returns per unit of risk. Toyota Motor is currently generating about 0.05 per unit of volatility. If you would invest  12,930  in Toyota Motor on September 20, 2024 and sell it today you would earn a total of  4,540  from holding Toyota Motor or generate 35.11% return on investment over 90 days.

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

Mullen Automotive  vs.  Toyota 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.

Toyota Motor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mullen Automotive and Toyota

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

The idea behind Mullen Automotive and Toyota 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.