Correlation Between Securitas and MSA Safety
Can any of the company-specific risk be diversified away by investing in both Securitas and MSA Safety 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 Securitas and MSA Safety into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Securitas AB and MSA Safety, you can compare the effects of market volatilities on Securitas and MSA Safety 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 Securitas with a short position of MSA Safety. Check out your portfolio center. Please also check ongoing floating volatility patterns of Securitas and MSA Safety.
Diversification Opportunities for Securitas and MSA Safety
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Securitas and MSA is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Securitas AB and MSA Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety and Securitas 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 Securitas AB are associated (or correlated) with MSA Safety. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSA Safety has no effect on the direction of Securitas i.e., Securitas and MSA Safety go up and down completely randomly.
Pair Corralation between Securitas and MSA Safety
Assuming the 90 days trading horizon Securitas AB is expected to generate 1.11 times more return on investment than MSA Safety. However, Securitas is 1.11 times more volatile than MSA Safety. It trades about 0.1 of its potential returns per unit of risk. MSA Safety is currently generating about 0.04 per unit of risk. If you would invest 8,167 in Securitas AB on August 31, 2024 and sell it today you would earn a total of 5,628 from holding Securitas AB or generate 68.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Securitas AB vs. MSA Safety
Performance |
| Timeline |
| Securitas AB |
| MSA Safety |
Securitas and MSA Safety Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Securitas and MSA Safety
The main advantage of trading using opposite Securitas and MSA Safety positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Securitas position performs unexpectedly, MSA Safety 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 MSA Safety will offset losses from the drop in MSA Safety's long position.The idea behind Securitas AB and MSA Safety pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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