Correlation Between Mullen and North West

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

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

Diversification Opportunities for Mullen and North West

0.61

Correlation Coefficient

Mullen  North West

Poor diversification

The 3 months correlation between Mullen and North is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Group and North West in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North West and Mullen 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 Group are associated (or correlated) with North West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North West has no effect on the direction of Mullen i.e., Mullen and North West go up and down completely randomly.

Pair Corralation between Mullen and North West

Assuming the 90 days trading horizon Mullen Group is expected to generate 1.21 times more return on investment than North West. However, Mullen is 1.21 times more volatile than North West. It trades about 0.13 of its potential returns per unit of risk. North West is currently generating about 0.13 per unit of risk. If you would invest  1,392  in Mullen Group on September 5, 2024 and sell it today you would earn a total of  169.00  from holding Mullen Group or generate 12.14% return on investment over 90 days.

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

Mullen Group  vs.  North West

Mullen Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mullen Group are ranked lower than 10 (%) 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.

North West

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North West are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, North West may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mullen and North West

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

The idea behind Mullen Group and North West 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.