Correlation Between Distribution Solutions and MSC Industrial

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

By analyzing existing cross correlation between Distribution Solutions Group and MSC Industrial Direct, you can compare the effects of market volatilities on Distribution Solutions and MSC Industrial 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 Distribution Solutions with a short position of MSC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distribution Solutions and MSC Industrial.

Diversification Opportunities for Distribution Solutions and MSC Industrial

0.61

Correlation Coefficient

Distribution Solutions  MSC Industrial

Poor diversification

The 3 months correlation between Distribution and MSC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Distribution Solutions Group and MSC Industrial Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSC Industrial Direct and Distribution Solutions 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 Distribution Solutions Group are associated (or correlated) with MSC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSC Industrial Direct has no effect on the direction of Distribution Solutions i.e., Distribution Solutions and MSC Industrial go up and down completely randomly.

Pair Corralation between Distribution Solutions and MSC Industrial

Given the investment horizon of 90 days Distribution Solutions is expected to generate 1.04 times less return on investment than MSC Industrial. In addition to that, Distribution Solutions is 1.34 times more volatile than MSC Industrial Direct. It trades about 0.02 of its total potential returns per unit of risk. MSC Industrial Direct is currently generating about 0.03 per unit of volatility. If you would invest  8,245  in MSC Industrial Direct on August 23, 2024 and sell it today you would earn a total of  168.00  from holding MSC Industrial Direct or generate 2.04% return on investment over 90 days.

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

Distribution Solutions Group  vs.  MSC Industrial Direct

Distribution Solutions

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Distribution Solutions Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Distribution Solutions is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

MSC Industrial Direct

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSC Industrial Direct are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, MSC Industrial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Distribution Solutions and MSC Industrial

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

The idea behind Distribution Solutions Group and MSC Industrial Direct 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 Transaction History module to view history of all your transactions and understand their impact on performance.