Correlation Between Quanex Building and MDU Resources

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

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

Diversification Opportunities for Quanex Building and MDU Resources

-0.36

Correlation Coefficient

Quanex Building  MDU Resources

Very good diversification

The 3 months correlation between Quanex and MDU is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products 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 Quanex Building 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 Quanex Building Products 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 Quanex Building i.e., Quanex Building and MDU Resources go up and down completely randomly.

Pair Corralation between Quanex Building and MDU Resources

Allowing for the 90-day total investment horizon Quanex Building Products is expected to generate 2.38 times more return on investment than MDU Resources. However, Quanex Building is 2.38 times more volatile than MDU Resources Group. It trades about 0.07 of its potential returns per unit of risk. MDU Resources Group is currently generating about 0.0 per unit of risk. If you would invest  1,745  in Quanex Building Products on May 3, 2025 and sell it today you would earn a total of  203.00  from holding Quanex Building Products or generate 11.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Quanex Building Products  vs.  MDU Resources Group

Quanex Building Products

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quanex Building Products are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Quanex Building showed solid returns over the last few months and may actually be approaching a breakup point.

MDU Resources Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days MDU Resources Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, MDU Resources is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Quanex Building and MDU Resources

The main advantage of trading using opposite Quanex Building and MDU Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanex Building 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 Quanex Building Products 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.