Correlation Between Mullen Automotive and Gap

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

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

Diversification Opportunities for Mullen Automotive and Gap

-0.09

Correlation Coefficient

Mullen Automotive  Gap

Good diversification

The 3 months correlation between Mullen and Gap is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Mullen Automotive and Gap Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap Inc 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap Inc has no effect on the direction of Mullen Automotive i.e., Mullen Automotive and Gap go up and down completely randomly.

Pair Corralation between Mullen Automotive and Gap

Given the investment horizon of 90 days Mullen Automotive is expected to under-perform the Gap. In addition to that, Mullen Automotive is 1.01 times more volatile than Gap Inc. It trades about -0.45 of its total potential returns per unit of risk. Gap Inc is currently generating about 0.12 per unit of volatility. If you would invest  2,194  in Gap Inc on March 16, 2024 and sell it today you would earn a total of  317.00  from holding Gap Inc or generate 14.45% return on investment over 90 days.

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

Mullen Automotive  vs.  Gap Inc

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 latest unsteady performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Gap Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gap Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Gap may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Mullen Automotive and Gap

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

The idea behind Mullen Automotive and Gap Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.