Correlation Between MDU Resources and Tejon Ranch

Can any of the company-specific risk be diversified away by investing in both MDU Resources and Tejon Ranch 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 Tejon Ranch 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 Tejon Ranch Co, you can compare the effects of market volatilities on MDU Resources and Tejon Ranch 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 Tejon Ranch. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDU Resources and Tejon Ranch.

Diversification Opportunities for MDU Resources and Tejon Ranch

-0.62

Correlation Coefficient

MDU Resources  Tejon Ranch

Excellent diversification

The 3 months correlation between MDU and Tejon is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding MDU Resources Group and Tejon Ranch Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tejon Ranch 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 Tejon Ranch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tejon Ranch has no effect on the direction of MDU Resources i.e., MDU Resources and Tejon Ranch go up and down completely randomly.

Pair Corralation between MDU Resources and Tejon Ranch

Considering the 90-day investment horizon MDU Resources Group is expected to generate 1.05 times more return on investment than Tejon Ranch. However, MDU Resources is 1.05 times more volatile than Tejon Ranch Co. It trades about 0.15 of its potential returns per unit of risk. Tejon Ranch Co is currently generating about -0.08 per unit of risk. If you would invest  1,508  in MDU Resources Group on September 28, 2024 and sell it today you would earn a total of  310.00  from holding MDU Resources Group or generate 20.56% return on investment over 90 days.

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

MDU Resources Group  vs.  Tejon Ranch Co

MDU Resources Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MDU Resources Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, MDU Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tejon Ranch

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tejon Ranch Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with MDU Resources and Tejon Ranch

The main advantage of trading using opposite MDU Resources and Tejon Ranch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MDU Resources position performs unexpectedly, Tejon Ranch 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 Tejon Ranch will offset losses from the drop in Tejon Ranch's long position.

The idea behind MDU Resources Group and Tejon Ranch Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.