Correlation Between WESCO International and MSC Industrial
Can any of the company-specific risk be diversified away by investing in both WESCO International and MSC Industrial 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 WESCO International and MSC Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WESCO International and MSC Industrial Direct, you can compare the effects of market volatilities on WESCO International and MSC Industrial 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 WESCO International with a short position of MSC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESCO International and MSC Industrial.
Diversification Opportunities for WESCO International and MSC Industrial
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between WESCO and MSC is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding WESCO International and MSC Industrial Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSC Industrial Direct and WESCO International 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 WESCO International are associated (or correlated) with MSC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSC Industrial Direct has no effect on the direction of WESCO International i.e., WESCO International and MSC Industrial go up and down completely randomly.
Pair Corralation between WESCO International and MSC Industrial
Considering the 90-day investment horizon WESCO International is expected to generate 3.69 times more return on investment than MSC Industrial. However, WESCO International is 3.69 times more volatile than MSC Industrial Direct. It trades about 0.0 of its potential returns per unit of risk. MSC Industrial Direct is currently generating about -0.03 per unit of risk. If you would invest 17,095 in WESCO International on January 26, 2024 and sell it today you would lose (1,136) from holding WESCO International or give up 6.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WESCO International vs. MSC Industrial Direct
Performance |
| Timeline |
| WESCO International |
| MSC Industrial Direct |
WESCO International and MSC Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WESCO International and MSC Industrial
The main advantage of trading using opposite WESCO International and MSC Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WESCO International position performs unexpectedly, MSC Industrial 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 MSC Industrial will offset losses from the drop in MSC Industrial's long position.The idea behind WESCO International and MSC Industrial Direct 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.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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