Correlation Between MSA Safety and SECOM CO

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

By analyzing existing cross correlation between MSA Safety and SECOM LTD, you can compare the effects of market volatilities on MSA Safety and SECOM CO 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 SECOM CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSA Safety and SECOM CO.

Diversification Opportunities for MSA Safety and SECOM CO

-0.45

Correlation Coefficient

MSA Safety  SECOM CO

Very good diversification

The 3 months correlation between MSA and SECOM is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety and SECOM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECOM LTD 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 SECOM CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SECOM LTD has no effect on the direction of MSA Safety i.e., MSA Safety and SECOM CO go up and down completely randomly.

Pair Corralation between MSA Safety and SECOM CO

Considering the 90-day investment horizon MSA Safety is expected to generate 0.93 times more return on investment than SECOM CO. However, MSA Safety is 1.08 times less risky than SECOM CO. It trades about 0.03 of its potential returns per unit of risk. SECOM LTD is currently generating about -0.28 per unit of risk. If you would invest  18,897  in MSA Safety on January 25, 2024 and sell it today you would earn a total of  107.00  from holding MSA Safety or generate 0.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

MSA Safety  vs.  SECOM LTD

MSA Safety

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MSA Safety are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, MSA Safety sustained solid returns over the last few months and may actually be approaching a breakup point.

SECOM LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SECOM LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MSA Safety and SECOM CO

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

The idea behind MSA Safety and SECOM LTD 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.