Correlation Between MSA Safety and SECOM CO
Can any of the company-specific risk be diversified away by investing in both MSA Safety and SECOM CO 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 SECOM CO 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 SECOM LTD, you can compare the effects of market volatilities on MSA Safety and SECOM CO 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 SECOM CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSA Safety and SECOM CO.
Diversification Opportunities for MSA Safety and SECOM CO
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between MSA and SECOM is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety Incorporated and SECOM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECOM LTD 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 SECOM CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SECOM LTD has no effect on the direction of MSA Safety i.e., MSA Safety and SECOM CO go up and down completely randomly.
Pair Corralation between MSA Safety and SECOM CO
Assuming the 90 days horizon MSA Safety Incorporated is expected to under-perform the SECOM CO. In addition to that, MSA Safety is 1.47 times more volatile than SECOM LTD. It trades about -0.14 of its total potential returns per unit of risk. SECOM LTD is currently generating about 0.16 per unit of volatility. If you would invest 3,180 in SECOM LTD on September 28, 2024 and sell it today you would earn a total of 100.00 from holding SECOM LTD or generate 3.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSA Safety Incorporated vs. SECOM LTD
Performance |
| Timeline |
| MSA Safety |
| SECOM LTD |
MSA Safety and SECOM CO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSA Safety and SECOM CO
The main advantage of trading using opposite MSA Safety and SECOM CO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSA Safety position performs unexpectedly, SECOM CO 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 SECOM CO will offset losses from the drop in SECOM CO'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 |
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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