Correlation Between Toshiba and MDU Resources

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

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

Diversification Opportunities for Toshiba and MDU Resources

0.34

Correlation Coefficient

Toshiba  MDU Resources

Weak diversification

The 3 months correlation between Toshiba and MDU is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Toshiba 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 Toshiba 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 Toshiba 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 Toshiba i.e., Toshiba and MDU Resources go up and down completely randomly.

Pair Corralation between Toshiba and MDU Resources

Assuming the 90 days horizon Toshiba is expected to generate 303.49 times more return on investment than MDU Resources. However, Toshiba is 303.49 times more volatile than MDU Resources Group. It trades about 0.44 of its potential returns per unit of risk. MDU Resources Group is currently generating about 0.06 per unit of risk. If you would invest  100,000,000  in Toshiba on February 3, 2024 and sell it today you would lose (99,997,219) from holding Toshiba or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	74.09%
Values	Daily Returns

Toshiba  vs.  MDU Resources Group

Toshiba

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toshiba has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Toshiba is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

MDU Resources Group

Risk-Adjusted Performance

28 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MDU Resources Group are ranked lower than 28 (%) 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 Toshiba and MDU Resources

The main advantage of trading using opposite Toshiba and MDU Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toshiba 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 Toshiba 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.