Correlation Between Global Industrial and MSC Industrial
Can any of the company-specific risk be diversified away by investing in both Global 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 Global 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 Global Industrial Co and MSC Industrial Direct, you can compare the effects of market volatilities on Global 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 Global Industrial with a short position of MSC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Industrial and MSC Industrial.
Diversification Opportunities for Global Industrial and MSC Industrial
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and MSC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Global Industrial Co 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 Global 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 Global Industrial Co 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 Global Industrial i.e., Global Industrial and MSC Industrial go up and down completely randomly.
Pair Corralation between Global Industrial and MSC Industrial
Considering the 90-day investment horizon Global Industrial Co is expected to under-perform the MSC Industrial. In addition to that, Global Industrial is 1.54 times more volatile than MSC Industrial Direct. It trades about -0.09 of its total potential returns per unit of risk. MSC Industrial Direct is currently generating about -0.02 per unit of volatility. If you would invest 8,178 in MSC Industrial Direct on November 18, 2024 and sell it today you would lose (33.00) from holding MSC Industrial Direct or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Industrial Co vs. MSC Industrial Direct
Performance |
| Timeline |
| Global Industrial |
| MSC Industrial Direct |
Global Industrial and MSC Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Industrial and MSC Industrial
The main advantage of trading using opposite Global Industrial and MSC Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global 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.| Global Industrial vs. Distribution Solutions Group | Global Industrial vs. Core Main | Global Industrial vs. Applied Industrial Technologies | Global Industrial vs. BlueLinx Holdings |
| MSC Industrial vs. DXP Enterprises | MSC Industrial vs. Core Main | MSC Industrial vs. WW Grainger | MSC Industrial vs. SiteOne Landscape Supply |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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