Correlation Between Total Energy and Mullen

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

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

Diversification Opportunities for Total Energy and Mullen

0.84

Correlation Coefficient

Total Energy  Mullen

Very poor diversification

The 3 months correlation between Total and Mullen is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Total Energy Services and Mullen Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mullen Group and Total Energy 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 Total Energy Services are associated (or correlated) with Mullen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mullen Group has no effect on the direction of Total Energy i.e., Total Energy and Mullen go up and down completely randomly.

Pair Corralation between Total Energy and Mullen

Assuming the 90 days trading horizon Total Energy Services is expected to generate 1.7 times more return on investment than Mullen. However, Total Energy is 1.7 times more volatile than Mullen Group. It trades about 0.09 of its potential returns per unit of risk. Mullen Group is currently generating about -0.07 per unit of risk. If you would invest  1,147  in Total Energy Services on September 15, 2024 and sell it today you would earn a total of  28.00  from holding Total Energy Services or generate 2.44% return on investment over 90 days.

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

Total Energy Services  vs.  Mullen Group

Total Energy Services

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Total Energy Services are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Total Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Mullen Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mullen Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Mullen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Total Energy and Mullen

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

The idea behind Total Energy Services and Mullen Group 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.

Check out your portfolio center.

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.