Correlation Between Toshiba Corp and MDU Resources

Can any of the company-specific risk be diversified away by investing in both Toshiba Corp 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 Corp 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 Corp PK and MDU Resources Group, you can compare the effects of market volatilities on Toshiba Corp 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 Corp with a short position of MDU Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toshiba Corp and MDU Resources.

Diversification Opportunities for Toshiba Corp and MDU Resources

-0.7

Correlation Coefficient

Toshiba Corp  MDU Resources

Excellent diversification

The 3 months correlation between Toshiba and MDU is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Toshiba Corp PK 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 Corp 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 Corp PK 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 Corp i.e., Toshiba Corp and MDU Resources go up and down completely randomly.

Pair Corralation between Toshiba Corp and MDU Resources

Assuming the 90 days horizon Toshiba Corp PK is expected to generate 0.5 times more return on investment than MDU Resources. However, Toshiba Corp PK is 2.02 times less risky than MDU Resources. It trades about 0.02 of its potential returns per unit of risk. MDU Resources Group is currently generating about -0.08 per unit of risk. If you would invest  1,490  in Toshiba Corp PK on February 3, 2024 and sell it today you would earn a total of  2.00  from holding Toshiba Corp PK or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.36%
Values	Daily Returns

Toshiba Corp PK  vs.  MDU Resources Group

Toshiba Corp PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toshiba Corp PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Toshiba Corp 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

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 Corp and MDU Resources

The main advantage of trading using opposite Toshiba Corp and MDU Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toshiba Corp 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 Corp PK 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.