Correlation Between ABB PAR and MSA Safety
Can any of the company-specific risk be diversified away by investing in both ABB PAR and MSA Safety 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 ABB PAR and MSA Safety into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB PAR AB and MSA Safety Incorporated, you can compare the effects of market volatilities on ABB PAR and MSA Safety 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 ABB PAR with a short position of MSA Safety. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB PAR and MSA Safety.
Diversification Opportunities for ABB PAR and MSA Safety
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between ABB and MSA is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding ABB PAR AB and MSA Safety Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety and ABB PAR 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 ABB PAR AB are associated (or correlated) with MSA Safety. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSA Safety has no effect on the direction of ABB PAR i.e., ABB PAR and MSA Safety go up and down completely randomly.
Pair Corralation between ABB PAR and MSA Safety
Assuming the 90 days horizon ABB PAR AB is expected to generate 0.77 times more return on investment than MSA Safety. However, ABB PAR AB is 1.3 times less risky than MSA Safety. It trades about -0.16 of its potential returns per unit of risk. MSA Safety Incorporated is currently generating about -0.14 per unit of risk. If you would invest 1,360 in ABB PAR AB on September 28, 2024 and sell it today you would lose (50.00) from holding ABB PAR AB or give up 3.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABB PAR AB vs. MSA Safety Incorporated
Performance |
| Timeline |
| ABB PAR AB |
| MSA Safety |
ABB PAR and MSA Safety Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABB PAR and MSA Safety
The main advantage of trading using opposite ABB PAR and MSA Safety positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB PAR position performs unexpectedly, MSA Safety 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 MSA Safety will offset losses from the drop in MSA Safety's long position.The idea behind ABB PAR AB and MSA Safety Incorporated 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.| MSA Safety vs. ABB PAR AB | MSA Safety vs. ASSA ABLOY AB | MSA Safety vs. SECOM LTD | MSA Safety vs. Halma plc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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