Correlation Between DXP Enterprises and MSC Industrial

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

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

Diversification Opportunities for DXP Enterprises and MSC Industrial

0.57

Correlation Coefficient

DXP Enterprises  MSC Industrial

Very weak diversification

The 3 months correlation between DXP and MSC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises 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 DXP Enterprises 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 DXP Enterprises 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 DXP Enterprises i.e., DXP Enterprises and MSC Industrial go up and down completely randomly.

Pair Corralation between DXP Enterprises and MSC Industrial

Given the investment horizon of 90 days DXP Enterprises is expected to under-perform the MSC Industrial. In addition to that, DXP Enterprises is 1.7 times more volatile than MSC Industrial Direct. It trades about -0.04 of its total potential returns per unit of risk. MSC Industrial Direct is currently generating about 0.0 per unit of volatility. If you would invest  8,147  in MSC Industrial Direct on February 16, 2025 and sell it today you would lose (161.00) from holding MSC Industrial Direct or give up 1.98% of portfolio value over 90 days.

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

DXP Enterprises  vs.  MSC Industrial Direct

DXP Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days DXP Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

MSC Industrial Direct

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSC Industrial Direct has generated negative risk-adjusted returns adding no value to investors with long positions. 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 DXP Enterprises and MSC Industrial

The main advantage of trading using opposite DXP Enterprises and MSC Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXP Enterprises 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 DXP Enterprises 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.