Correlation Between MSA Safety and Securitas

Can any of the company-specific risk be diversified away by investing in both MSA Safety and Securitas 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 MSA Safety and Securitas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MSA Safety and Securitas AB, you can compare the effects of market volatilities on MSA Safety and Securitas 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 MSA Safety with a short position of Securitas. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSA Safety and Securitas.

Diversification Opportunities for MSA Safety and Securitas

0.83

Correlation Coefficient

MSA Safety  Securitas

Very poor diversification

The 3 months correlation between MSA and Securitas is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety and Securitas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Securitas AB and MSA Safety 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 MSA Safety are associated (or correlated) with Securitas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Securitas AB has no effect on the direction of MSA Safety i.e., MSA Safety and Securitas go up and down completely randomly.

Pair Corralation between MSA Safety and Securitas

Considering the 90-day investment horizon MSA Safety is expected to generate 1.94 times less return on investment than Securitas. But when comparing it to its historical volatility, MSA Safety is 4.78 times less risky than Securitas. It trades about 0.07 of its potential returns per unit of risk. Securitas AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,221  in Securitas AB on January 24, 2024 and sell it today you would lose (190.00) from holding Securitas AB or give up 15.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

MSA Safety  vs.  Securitas AB

MSA Safety

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MSA Safety are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, MSA Safety may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Securitas AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Securitas AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Securitas may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with MSA Safety and Securitas

The main advantage of trading using opposite MSA Safety and Securitas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSA Safety position performs unexpectedly, Securitas 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 Securitas will offset losses from the drop in Securitas' long position.

The idea behind MSA Safety and Securitas AB 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.