Correlation Between MDU Resources and Alliance Global

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

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

Diversification Opportunities for MDU Resources and Alliance Global

0.81

Correlation Coefficient

MDU Resources  Alliance Global

Very poor diversification

The 3 months correlation between MDU and Alliance is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding MDU Resources Group and Alliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Global Group and MDU Resources 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 MDU Resources Group are associated (or correlated) with Alliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Global Group has no effect on the direction of MDU Resources i.e., MDU Resources and Alliance Global go up and down completely randomly.

Pair Corralation between MDU Resources and Alliance Global

Considering the 90-day investment horizon MDU Resources Group is expected to generate 0.33 times more return on investment than Alliance Global. However, MDU Resources Group is 3.02 times less risky than Alliance Global. It trades about -0.07 of its potential returns per unit of risk. Alliance Global Group is currently generating about -0.08 per unit of risk. If you would invest  1,786  in MDU Resources Group on December 28, 2024 and sell it today you would lose (120.00) from holding MDU Resources Group or give up 6.72% of portfolio value over 90 days.

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

MDU Resources Group  vs.  Alliance Global Group

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.

Alliance Global Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MDU Resources and Alliance Global

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

The idea behind MDU Resources Group and Alliance Global 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.