Correlation Between Brookfield Business and MDU Resources
Can any of the company-specific risk be diversified away by investing in both Brookfield Business 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 Brookfield Business and MDU Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Business Partners and MDU Resources Group, you can compare the effects of market volatilities on Brookfield Business 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 Brookfield Business with a short position of MDU Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and MDU Resources.
Diversification Opportunities for Brookfield Business and MDU Resources
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookfield and MDU is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners 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 Brookfield Business 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 Brookfield Business Partners 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 Brookfield Business i.e., Brookfield Business and MDU Resources go up and down completely randomly.
Pair Corralation between Brookfield Business and MDU Resources
Considering the 90-day investment horizon Brookfield Business is expected to generate 1.38 times less return on investment than MDU Resources. But when comparing it to its historical volatility, Brookfield Business Partners is 1.27 times less risky than MDU Resources. It trades about 0.37 of its potential returns per unit of risk. MDU Resources Group is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 1,641 in MDU Resources Group on August 28, 2024 and sell it today you would earn a total of 372.00 from holding MDU Resources Group or generate 22.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Brookfield Business Partners vs. MDU Resources Group
Performance |
| Timeline |
| Brookfield Business |
| MDU Resources Group |
Brookfield Business and MDU Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Business and MDU Resources
The main advantage of trading using opposite Brookfield Business and MDU Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Business 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.| Brookfield Business vs. Canadian Solar | Brookfield Business vs. Maxeon Solar Technologies | Brookfield Business vs. SolarEdge Technologies | Brookfield Business vs. Sunnova Energy International |
| MDU Resources vs. Griffon | MDU Resources vs. Brookfield Business Partners | MDU Resources vs. Matthews International | MDU Resources vs. Steel Partners 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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