Correlation Between Arlo Technologies and MSA Safety

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Can any of the company-specific risk be diversified away by investing in both Arlo Technologies 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 Arlo Technologies and MSA Safety into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arlo Technologies and MSA Safety, you can compare the effects of market volatilities on Arlo Technologies 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 Arlo Technologies with a short position of MSA Safety. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arlo Technologies and MSA Safety.

Diversification Opportunities for Arlo Technologies and MSA Safety

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Arlo and MSA is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arlo Technologies and MSA Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety and Arlo Technologies 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 Arlo Technologies 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 Arlo Technologies i.e., Arlo Technologies and MSA Safety go up and down completely randomly.

Pair Corralation between Arlo Technologies and MSA Safety

Given the investment horizon of 90 days Arlo Technologies is expected to generate 2.3 times more return on investment than MSA Safety. However, Arlo Technologies is 2.3 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 0.11 per unit of risk. If you would invest  603.00  in Arlo Technologies on December 29, 2023 and sell it today you would earn a total of  674.00  from holding Arlo Technologies or generate 111.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Arlo Technologies  vs.  MSA Safety

 Performance 
       Timeline  
Arlo Technologies 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Arlo Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting essential indicators, Arlo Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.
MSA Safety 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in MSA Safety are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MSA Safety sustained solid returns over the last few months and may actually be approaching a breakup point.

Arlo Technologies and MSA Safety Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arlo Technologies and MSA Safety

The main advantage of trading using opposite Arlo Technologies and MSA Safety positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arlo Technologies 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 Arlo Technologies 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.
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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