Correlation Between Swire Pacific and MDU Resources

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

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

Diversification Opportunities for Swire Pacific and MDU Resources

0.19

Correlation Coefficient

Swire Pacific  MDU Resources

Average diversification

The 3 months correlation between Swire and MDU is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Swire Pacific Ltd 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 Swire Pacific 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 Swire Pacific Ltd 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 Swire Pacific i.e., Swire Pacific and MDU Resources go up and down completely randomly.

Pair Corralation between Swire Pacific and MDU Resources

If you would invest  1,598  in MDU Resources Group on September 1, 2024 and sell it today you would earn a total of  406.00  from holding MDU Resources Group or generate 25.41% return on investment over 90 days.

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

Swire Pacific Ltd  vs.  MDU Resources Group

Swire Pacific

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swire Pacific Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Swire Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MDU Resources Group

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MDU Resources Group are ranked lower than 21 (%) 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.

Pair Trading with Swire Pacific and MDU Resources

The main advantage of trading using opposite Swire Pacific and MDU Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swire Pacific 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 Swire Pacific Ltd 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.