Correlation Between MSC Industrial and Now

Can any of the company-specific risk be diversified away by investing in both MSC Industrial and Now 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 Now 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 Now Inc, you can compare the effects of market volatilities on MSC Industrial and Now 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 Now. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSC Industrial and Now.

Diversification Opportunities for MSC Industrial and Now

0.66

Correlation Coefficient

MSC Industrial  Now

Poor diversification

The 3 months correlation between MSC and Now is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MSC Industrial Direct and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Inc 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 Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of MSC Industrial i.e., MSC Industrial and Now go up and down completely randomly.

Pair Corralation between MSC Industrial and Now

Considering the 90-day investment horizon MSC Industrial Direct is expected to generate 1.16 times more return on investment than Now. However, MSC Industrial is 1.16 times more volatile than Now Inc. It trades about 0.05 of its potential returns per unit of risk. Now Inc is currently generating about 0.01 per unit of risk. If you would invest  8,241  in MSC Industrial Direct on September 17, 2024 and sell it today you would earn a total of  90.00  from holding MSC Industrial Direct or generate 1.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

MSC Industrial Direct  vs.  Now Inc

MSC Industrial Direct

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSC Industrial Direct are ranked lower than 2 (%) 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.

Now Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Now showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MSC Industrial and Now

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

The idea behind MSC Industrial Direct and Now Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.