Correlation Between MSC Industrial and WESCO International

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

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

Diversification Opportunities for MSC Industrial and WESCO International

0.61

Correlation Coefficient

MSC Industrial  WESCO International

Poor diversification

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

Pair Corralation between MSC Industrial and WESCO International

Considering the 90-day investment horizon MSC Industrial Direct is expected to generate 17.99 times more return on investment than WESCO International. However, MSC Industrial is 17.99 times more volatile than WESCO International. It trades about 0.09 of its potential returns per unit of risk. WESCO International is currently generating about 0.15 per unit of risk. If you would invest  8,164  in MSC Industrial Direct on August 30, 2024 and sell it today you would earn a total of  360.00  from holding MSC Industrial Direct or generate 4.41% return on investment over 90 days.

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

MSC Industrial Direct  vs.  WESCO International

MSC Industrial Direct

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MSC Industrial Direct are ranked lower than 3 (%) 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.

WESCO International

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WESCO International are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, WESCO International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MSC Industrial and WESCO International

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

The idea behind MSC Industrial Direct and WESCO International 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..