Correlation Between Halma Plc and MDU Resources

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

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

Diversification Opportunities for Halma Plc and MDU Resources

0.45

Correlation Coefficient

Halma Plc  MDU Resources

Very weak diversification

The 3 months correlation between Halma and MDU is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Halma plc 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 Halma Plc 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 Halma plc 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 Halma Plc i.e., Halma Plc and MDU Resources go up and down completely randomly.

Pair Corralation between Halma Plc and MDU Resources

Assuming the 90 days horizon Halma plc is expected to under-perform the MDU Resources. In addition to that, Halma Plc is 2.06 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 -0.19 per unit of volatility. If you would invest  1,896  in MDU Resources Group on October 9, 2024 and sell it today you would lose (103.00) from holding MDU Resources Group or give up 5.43% of portfolio value over 90 days.

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

Halma plc  vs.  MDU Resources Group

Halma plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halma plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MDU Resources Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MDU Resources Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, MDU Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Halma Plc and MDU Resources

The main advantage of trading using opposite Halma Plc and MDU Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halma Plc 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 Halma plc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..