Correlation Between MDU Resources and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both MDU Resources and Compass Diversified 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 Compass Diversified 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 Compass Diversified Holdings, you can compare the effects of market volatilities on MDU Resources and Compass Diversified 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 Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDU Resources and Compass Diversified.
Diversification Opportunities for MDU Resources and Compass Diversified
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MDU and Compass is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MDU Resources Group and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of MDU Resources i.e., MDU Resources and Compass Diversified go up and down completely randomly.
Pair Corralation between MDU Resources and Compass Diversified
Considering the 90-day investment horizon MDU Resources Group is expected to generate 1.12 times more return on investment than Compass Diversified. However, MDU Resources is 1.12 times more volatile than Compass Diversified Holdings. It trades about 0.41 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about 0.26 per unit of risk. 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 | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
MDU Resources Group vs. Compass Diversified Holdings
Performance |
| Timeline |
| MDU Resources Group |
| Compass Diversified |
MDU Resources and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MDU Resources and Compass Diversified
The main advantage of trading using opposite MDU Resources and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MDU Resources position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified's long position.| MDU Resources vs. Griffon | MDU Resources vs. Brookfield Business Partners | MDU Resources vs. Matthews International | MDU Resources vs. Steel Partners Holdings |
| Compass Diversified vs. Matthews International | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Valmont Industries | Compass Diversified vs. Brookfield Business Partners |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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