Correlation Between Hitachi and MDU Resources

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

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

Diversification Opportunities for Hitachi and MDU Resources

0.86

Correlation Coefficient

Hitachi  MDU Resources

Very poor diversification

The 3 months correlation between Hitachi and MDU is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Ltd ADR 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 Hitachi 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 Hitachi Ltd ADR 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 Hitachi i.e., Hitachi and MDU Resources go up and down completely randomly.

Pair Corralation between Hitachi and MDU Resources

Assuming the 90 days horizon Hitachi Ltd ADR is expected to generate 1.94 times more return on investment than MDU Resources. However, Hitachi is 1.94 times more volatile than MDU Resources Group. It trades about 0.02 of its potential returns per unit of risk. MDU Resources Group is currently generating about -0.1 per unit of risk. If you would invest  17,704  in Hitachi Ltd ADR on January 30, 2024 and sell it today you would earn a total of  100.00  from holding Hitachi Ltd ADR or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Hitachi Ltd ADR  vs.  MDU Resources Group

Hitachi Ltd ADR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Ltd ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Hitachi showed solid returns over the last few months and may actually be approaching a breakup point.

MDU Resources Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MDU Resources Group are ranked lower than 23 (%) 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 Hitachi and MDU Resources

The main advantage of trading using opposite Hitachi and MDU Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi 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 Hitachi Ltd ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.