Correlation Between MSA Safety and ASSA ABLOY
Can any of the company-specific risk be diversified away by investing in both MSA Safety and ASSA ABLOY 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 MSA Safety and ASSA ABLOY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSA Safety Incorporated and ASSA ABLOY AB, you can compare the effects of market volatilities on MSA Safety and ASSA ABLOY 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 MSA Safety with a short position of ASSA ABLOY. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSA Safety and ASSA ABLOY.
Diversification Opportunities for MSA Safety and ASSA ABLOY
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MSA and ASSA is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety Incorporated and ASSA ABLOY AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASSA ABLOY AB and MSA Safety 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 MSA Safety Incorporated are associated (or correlated) with ASSA ABLOY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASSA ABLOY AB has no effect on the direction of MSA Safety i.e., MSA Safety and ASSA ABLOY go up and down completely randomly.
Pair Corralation between MSA Safety and ASSA ABLOY
Assuming the 90 days horizon MSA Safety is expected to generate 2.83 times less return on investment than ASSA ABLOY. But when comparing it to its historical volatility, MSA Safety Incorporated is 1.03 times less risky than ASSA ABLOY. It trades about 0.04 of its potential returns per unit of risk. ASSA ABLOY AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,332 in ASSA ABLOY AB on September 28, 2024 and sell it today you would earn a total of 1,513 from holding ASSA ABLOY AB or generate 113.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSA Safety Incorporated vs. ASSA ABLOY AB
Performance |
| Timeline |
| MSA Safety |
| ASSA ABLOY AB |
MSA Safety and ASSA ABLOY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSA Safety and ASSA ABLOY
The main advantage of trading using opposite MSA Safety and ASSA ABLOY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSA Safety position performs unexpectedly, ASSA ABLOY 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 ASSA ABLOY will offset losses from the drop in ASSA ABLOY's long position.| MSA Safety vs. ABB PAR AB | MSA Safety vs. ASSA ABLOY AB | MSA Safety vs. SECOM LTD | MSA Safety vs. Halma plc |
| ASSA ABLOY vs. ABB PAR AB | ASSA ABLOY vs. SECOM LTD | ASSA ABLOY vs. Halma plc | ASSA ABLOY vs. Allegion 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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