Correlation Between Resources Connection and MSA Safety

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

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

Diversification Opportunities for Resources Connection and MSA Safety

0.7

Correlation Coefficient

Resources Connection  MSA Safety

Poor diversification

The 3 months correlation between Resources and MSA is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Resources Connection and MSA Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety and Resources Connection 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 Resources Connection 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 Resources Connection i.e., Resources Connection and MSA Safety go up and down completely randomly.

Pair Corralation between Resources Connection and MSA Safety

Considering the 90-day investment horizon Resources Connection is expected to under-perform the MSA Safety. In addition to that, Resources Connection is 1.9 times more volatile than MSA Safety. It trades about -0.1 of its total potential returns per unit of risk. MSA Safety is currently generating about 0.0 per unit of volatility. If you would invest  17,535  in MSA Safety on September 2, 2024 and sell it today you would lose (154.00) from holding MSA Safety or give up 0.88% of portfolio value over 90 days.

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

Resources Connection  vs.  MSA Safety

Resources Connection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Resources Connection has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 Resources Connection and MSA Safety

The main advantage of trading using opposite Resources Connection and MSA Safety positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resources Connection 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 Resources Connection 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.