Correlation Between Applied Industrial and MSC Industrial
Can any of the company-specific risk be diversified away by investing in both Applied Industrial and MSC Industrial 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 Applied Industrial and MSC Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Industrial Technologies and MSC Industrial Direct, you can compare the effects of market volatilities on Applied Industrial and MSC Industrial 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 Applied Industrial with a short position of MSC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Industrial and MSC Industrial.
Diversification Opportunities for Applied Industrial and MSC Industrial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and MSC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Applied Industrial Technologie and MSC Industrial Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSC Industrial Direct and Applied Industrial 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 Applied Industrial Technologies are associated (or correlated) with MSC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSC Industrial Direct has no effect on the direction of Applied Industrial i.e., Applied Industrial and MSC Industrial go up and down completely randomly.
Pair Corralation between Applied Industrial and MSC Industrial
Considering the 90-day investment horizon Applied Industrial Technologies is expected to generate 1.02 times more return on investment than MSC Industrial. However, Applied Industrial is 1.02 times more volatile than MSC Industrial Direct. It trades about 0.13 of its potential returns per unit of risk. MSC Industrial Direct is currently generating about -0.02 per unit of risk. If you would invest 16,454 in Applied Industrial Technologies on August 27, 2024 and sell it today you would earn a total of 11,257 from holding Applied Industrial Technologies or generate 68.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Industrial Technologie vs. MSC Industrial Direct
Performance |
| Timeline |
| Applied Industrial |
| MSC Industrial Direct |
Applied Industrial and MSC Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Industrial and MSC Industrial
The main advantage of trading using opposite Applied Industrial and MSC Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Industrial position performs unexpectedly, MSC Industrial 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 MSC Industrial will offset losses from the drop in MSC Industrial's long position.| Applied Industrial vs. Global Industrial Co | Applied Industrial vs. BlueLinx Holdings | Applied Industrial vs. WESCO International | Applied Industrial vs. MSC Industrial Direct |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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