Correlation Between SECOM CO and MSA Safety
Can any of the company-specific risk be diversified away by investing in both SECOM CO 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 SECOM CO and MSA Safety into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SECOM LTD and MSA Safety Incorporated, you can compare the effects of market volatilities on SECOM CO 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 SECOM CO with a short position of MSA Safety. Check out your portfolio center. Please also check ongoing floating volatility patterns of SECOM CO and MSA Safety.
Diversification Opportunities for SECOM CO and MSA Safety
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between SECOM and MSA is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding SECOM LTD and MSA Safety Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety and SECOM CO 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 SECOM LTD 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 SECOM CO i.e., SECOM CO and MSA Safety go up and down completely randomly.
Pair Corralation between SECOM CO and MSA Safety
Assuming the 90 days horizon SECOM LTD is expected to generate 0.68 times more return on investment than MSA Safety. However, SECOM LTD is 1.47 times less risky than MSA Safety. It trades about 0.16 of its potential returns per unit of risk. MSA Safety Incorporated is currently generating about -0.14 per unit of risk. 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 |
SECOM LTD vs. MSA Safety Incorporated
Performance |
| Timeline |
| SECOM LTD |
| MSA Safety |
SECOM CO and MSA Safety Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SECOM CO and MSA Safety
The main advantage of trading using opposite SECOM CO and MSA Safety positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SECOM CO 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 SECOM LTD and MSA Safety Incorporated 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. 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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