Correlation Between MSC Industrial and Fastenal
Can any of the company-specific risk be diversified away by investing in both MSC Industrial and Fastenal 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 Fastenal 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 Fastenal Company, you can compare the effects of market volatilities on MSC Industrial and Fastenal 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 Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSC Industrial and Fastenal.
Diversification Opportunities for MSC Industrial and Fastenal
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MSC and Fastenal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding MSC Industrial Direct and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of MSC Industrial i.e., MSC Industrial and Fastenal go up and down completely randomly.
Pair Corralation between MSC Industrial and Fastenal
Considering the 90-day investment horizon MSC Industrial is expected to generate 2.33 times less return on investment than Fastenal. In addition to that, MSC Industrial is 1.23 times more volatile than Fastenal Company. It trades about 0.03 of its total potential returns per unit of risk. Fastenal Company is currently generating about 0.08 per unit of volatility. If you would invest 6,673 in Fastenal Company on November 2, 2024 and sell it today you would earn a total of 825.00 from holding Fastenal Company or generate 12.36% 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. Fastenal Company
Performance |
| Timeline |
| MSC Industrial Direct |
| Fastenal |
MSC Industrial and Fastenal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSC Industrial and Fastenal
The main advantage of trading using opposite MSC Industrial and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSC Industrial position performs unexpectedly, Fastenal 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 Fastenal will offset losses from the drop in Fastenal's long position.| MSC Industrial vs. DXP Enterprises | MSC Industrial vs. Core Main | MSC Industrial vs. WW Grainger | MSC Industrial vs. SiteOne Landscape Supply |
| Fastenal vs. Applied Industrial Technologies | Fastenal vs. MSC Industrial Direct | Fastenal vs. Ferguson Plc | Fastenal 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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