Correlation Between MDU Resources and Ivy Energy

Can any of the company-specific risk be diversified away by investing in both MDU Resources and Ivy Energy 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 Ivy Energy 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 Ivy Energy Fund, you can compare the effects of market volatilities on MDU Resources and Ivy Energy 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 Ivy Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDU Resources and Ivy Energy.

Diversification Opportunities for MDU Resources and Ivy Energy

-0.22

Correlation Coefficient

MDU Resources  Ivy Energy

Very good diversification

The 3 months correlation between MDU and Ivy is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding MDU Resources Group and Ivy Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivy Energy Fund 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 Ivy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivy Energy Fund has no effect on the direction of MDU Resources i.e., MDU Resources and Ivy Energy go up and down completely randomly.

Pair Corralation between MDU Resources and Ivy Energy

Considering the 90-day investment horizon MDU Resources Group is expected to generate 1.46 times more return on investment than Ivy Energy. However, MDU Resources is 1.46 times more volatile than Ivy Energy Fund. It trades about 0.08 of its potential returns per unit of risk. Ivy Energy Fund is currently generating about -0.02 per unit of risk. If you would invest  1,086  in MDU Resources Group on October 7, 2024 and sell it today you would earn a total of  730.00  from holding MDU Resources Group or generate 67.22% return on investment over 90 days.

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

MDU Resources Group  vs.  Ivy Energy Fund

MDU Resources Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MDU Resources Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, MDU Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ivy Energy Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivy Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with MDU Resources and Ivy Energy

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

The idea behind MDU Resources Group and Ivy Energy Fund 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.