Correlation Between MDU Resources and FTAI Infrastructure
Can any of the company-specific risk be diversified away by investing in both MDU Resources and FTAI Infrastructure 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 FTAI Infrastructure 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 FTAI Infrastructure, you can compare the effects of market volatilities on MDU Resources and FTAI Infrastructure 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 FTAI Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDU Resources and FTAI Infrastructure.
Diversification Opportunities for MDU Resources and FTAI Infrastructure
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MDU and FTAI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MDU Resources Group and FTAI Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Infrastructure 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 FTAI Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Infrastructure has no effect on the direction of MDU Resources i.e., MDU Resources and FTAI Infrastructure go up and down completely randomly.
Pair Corralation between MDU Resources and FTAI Infrastructure
Considering the 90-day investment horizon MDU Resources is expected to generate 3.35 times less return on investment than FTAI Infrastructure. But when comparing it to its historical volatility, MDU Resources Group is 2.67 times less risky than FTAI Infrastructure. It trades about 0.07 of its potential returns per unit of risk. FTAI Infrastructure is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 283.00 in FTAI Infrastructure on March 4, 2024 and sell it today you would earn a total of 572.00 from holding FTAI Infrastructure or generate 202.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 94.96% |
Values | Daily Returns |
MDU Resources Group vs. FTAI Infrastructure
Performance |
Timeline |
MDU Resources Group |
FTAI Infrastructure |
MDU Resources and FTAI Infrastructure Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MDU Resources and FTAI Infrastructure
The main advantage of trading using opposite MDU Resources and FTAI Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MDU Resources position performs unexpectedly, FTAI Infrastructure 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 FTAI Infrastructure will offset losses from the drop in FTAI Infrastructure's long position.MDU Resources vs. Griffon | MDU Resources vs. Brookfield Business Partners | MDU Resources vs. Matthews International | MDU Resources vs. Steel Partners Holdings |
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Check out your portfolio center.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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