Correlation Between MSC Industrial and DXP Enterprises
Can any of the company-specific risk be diversified away by investing in both MSC Industrial and DXP Enterprises 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 MSC Industrial and DXP Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSC Industrial Direct and DXP Enterprises, you can compare the effects of market volatilities on MSC Industrial and DXP Enterprises 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 MSC Industrial with a short position of DXP Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSC Industrial and DXP Enterprises.
Diversification Opportunities for MSC Industrial and DXP Enterprises
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MSC and DXP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MSC Industrial Direct and DXP Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXP Enterprises and MSC 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 MSC Industrial Direct are associated (or correlated) with DXP Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXP Enterprises has no effect on the direction of MSC Industrial i.e., MSC Industrial and DXP Enterprises go up and down completely randomly.
Pair Corralation between MSC Industrial and DXP Enterprises
Considering the 90-day investment horizon MSC Industrial is expected to generate 16.55 times less return on investment than DXP Enterprises. But when comparing it to its historical volatility, MSC Industrial Direct is 1.48 times less risky than DXP Enterprises. It trades about 0.01 of its potential returns per unit of risk. DXP Enterprises is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,964 in DXP Enterprises on August 24, 2024 and sell it today you would earn a total of 1,948 from holding DXP Enterprises or generate 39.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSC Industrial Direct vs. DXP Enterprises
Performance |
| Timeline |
| MSC Industrial Direct |
| DXP Enterprises |
MSC Industrial and DXP Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSC Industrial and DXP Enterprises
The main advantage of trading using opposite MSC Industrial and DXP Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSC Industrial position performs unexpectedly, DXP Enterprises 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 DXP Enterprises will offset losses from the drop in DXP Enterprises' long position.| MSC Industrial vs. DXP Enterprises | MSC Industrial vs. Core Main | MSC Industrial vs. WW Grainger | MSC Industrial vs. SiteOne Landscape Supply |
| DXP Enterprises vs. Global Industrial Co | DXP Enterprises vs. EVI Industries | DXP Enterprises vs. Core Main | DXP Enterprises vs. Watsco Inc |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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