Correlation Between MDU Resources and Honeywell International
Can any of the company-specific risk be diversified away by investing in both MDU Resources and Honeywell International 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 Honeywell International 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 Honeywell International, you can compare the effects of market volatilities on MDU Resources and Honeywell International 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 Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDU Resources and Honeywell International.
Diversification Opportunities for MDU Resources and Honeywell International
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MDU and Honeywell is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding MDU Resources Group and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International 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 Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of MDU Resources i.e., MDU Resources and Honeywell International go up and down completely randomly.
Pair Corralation between MDU Resources and Honeywell International
Considering the 90-day investment horizon MDU Resources Group is expected to generate 1.12 times more return on investment than Honeywell International. However, MDU Resources is 1.12 times more volatile than Honeywell International. It trades about 0.07 of its potential returns per unit of risk. Honeywell International is currently generating about 0.04 per unit of risk. If you would invest 1,845 in MDU Resources Group on February 3, 2024 and sell it today you would earn a total of 663.00 from holding MDU Resources Group or generate 35.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
MDU Resources Group vs. Honeywell International
Performance |
Timeline |
MDU Resources Group |
Honeywell International |
MDU Resources and Honeywell International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MDU Resources and Honeywell International
The main advantage of trading using opposite MDU Resources and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MDU Resources position performs unexpectedly, Honeywell International 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 Honeywell International will offset losses from the drop in Honeywell International's long position.MDU Resources vs. Griffon | MDU Resources vs. Brookfield Business Partners | MDU Resources vs. Matthews International | MDU Resources vs. Steel Partners Holdings |
Honeywell International vs. MDU Resources Group | Honeywell International vs. Valmont Industries | Honeywell International vs. Griffon | Honeywell International vs. Compass Diversified Holdings |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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