Correlation Between MSA Safety and ADT
Can any of the company-specific risk be diversified away by investing in both MSA Safety and ADT 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 ADT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSA Safety and ADT Inc, you can compare the effects of market volatilities on MSA Safety and ADT 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 ADT. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSA Safety and ADT.
Diversification Opportunities for MSA Safety and ADT
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between MSA and ADT is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc 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 are associated (or correlated) with ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of MSA Safety i.e., MSA Safety and ADT go up and down completely randomly.
Pair Corralation between MSA Safety and ADT
Considering the 90-day investment horizon MSA Safety is expected to generate 3.41 times less return on investment than ADT. But when comparing it to its historical volatility, MSA Safety is 3.27 times less risky than ADT. It trades about 0.1 of its potential returns per unit of risk. ADT Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 692.00 in ADT Inc on August 24, 2024 and sell it today you would earn a total of 62.00 from holding ADT Inc or generate 8.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSA Safety vs. ADT Inc
Performance |
| Timeline |
| MSA Safety |
| ADT Inc |
MSA Safety and ADT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSA Safety and ADT
The main advantage of trading using opposite MSA Safety and ADT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSA Safety position performs unexpectedly, ADT 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 ADT will offset losses from the drop in ADT's long position.| MSA Safety vs. Allegion PLC | MSA Safety vs. Resideo Technologies | MSA Safety vs. NL Industries | MSA Safety vs. Brady |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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