Correlation Between CompX International and MSA Safety

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

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

Diversification Opportunities for CompX International and MSA Safety

-0.06

Correlation Coefficient

CompX International  MSA Safety

Good diversification

The 3 months correlation between CompX and MSA is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CompX International and MSA Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety and CompX 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 CompX International 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 CompX International i.e., CompX International and MSA Safety go up and down completely randomly.

Pair Corralation between CompX International and MSA Safety

Considering the 90-day investment horizon CompX International is expected to generate 3.18 times more return on investment than MSA Safety. However, CompX International is 3.18 times more volatile than MSA Safety. It trades about 0.01 of its potential returns per unit of risk. MSA Safety is currently generating about 0.0 per unit of risk. If you would invest  2,806  in CompX International on September 1, 2024 and sell it today you would lose (45.00) from holding CompX International or give up 1.6% of portfolio value over 90 days.

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

CompX International  vs.  MSA Safety

CompX International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CompX International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, CompX International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MSA Safety

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSA Safety has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MSA Safety is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CompX International and MSA Safety

The main advantage of trading using opposite CompX International and MSA Safety positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompX International 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 CompX International 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.