Correlation Between MSA Safety and Deluxe

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

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

Diversification Opportunities for MSA Safety and Deluxe

0.74

Correlation Coefficient

MSA Safety  Deluxe

Poor diversification

The 3 months correlation between MSA and Deluxe is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety and Deluxe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deluxe 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 Deluxe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deluxe has no effect on the direction of MSA Safety i.e., MSA Safety and Deluxe go up and down completely randomly.

Pair Corralation between MSA Safety and Deluxe

Considering the 90-day investment horizon MSA Safety is expected to generate 0.48 times more return on investment than Deluxe. However, MSA Safety is 2.09 times less risky than Deluxe. It trades about -0.12 of its potential returns per unit of risk. Deluxe is currently generating about -0.22 per unit of risk. If you would invest  16,665  in MSA Safety on December 27, 2024 and sell it today you would lose (1,377) from holding MSA Safety or give up 8.26% of portfolio value over 90 days.

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

MSA Safety  vs.  Deluxe

MSA Safety

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSA Safety has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Deluxe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deluxe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MSA Safety and Deluxe

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

The idea behind MSA Safety and Deluxe 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.