Correlation Between Ayala and MDU Resources

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

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

Diversification Opportunities for Ayala and MDU Resources

0.69

Correlation Coefficient

Ayala  MDU Resources

Poor diversification

The 3 months correlation between Ayala and MDU is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ayala and MDU Resources Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDU Resources Group and Ayala 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 Ayala are associated (or correlated) with MDU Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDU Resources Group has no effect on the direction of Ayala i.e., Ayala and MDU Resources go up and down completely randomly.

Pair Corralation between Ayala and MDU Resources

Assuming the 90 days horizon Ayala is expected to under-perform the MDU Resources. In addition to that, Ayala is 1.6 times more volatile than MDU Resources Group. It trades about -0.13 of its total potential returns per unit of risk. MDU Resources Group is currently generating about -0.07 per unit of volatility. If you would invest  1,806  in MDU Resources Group on December 27, 2024 and sell it today you would lose (128.00) from holding MDU Resources Group or give up 7.09% of portfolio value over 90 days.

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

Ayala  vs.  MDU Resources Group

Ayala

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ayala has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

MDU Resources Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days MDU Resources Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ayala and MDU Resources

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

The idea behind Ayala and MDU Resources 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.