Correlation Between MSA Safety and Verisk Analytics

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

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

Diversification Opportunities for MSA Safety and Verisk Analytics

-0.72

Correlation Coefficient

MSA Safety  Verisk Analytics

Pay attention - limited upside

The 3 months correlation between MSA and Verisk is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding MSA Safety and Verisk Analytics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verisk Analytics and MSA Safety 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 MSA Safety are associated (or correlated) with Verisk Analytics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verisk Analytics has no effect on the direction of MSA Safety i.e., MSA Safety and Verisk Analytics go up and down completely randomly.

Pair Corralation between MSA Safety and Verisk Analytics

Considering the 90-day investment horizon MSA Safety is expected to generate 0.91 times more return on investment than Verisk Analytics. However, MSA Safety is 1.1 times less risky than Verisk Analytics. It trades about 0.15 of its potential returns per unit of risk. Verisk Analytics is currently generating about -0.06 per unit of risk. If you would invest  16,640  in MSA Safety on February 3, 2024 and sell it today you would earn a total of  1,892  from holding MSA Safety or generate 11.37% return on investment over 90 days.

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

MSA Safety  vs.  Verisk Analytics

MSA Safety

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MSA Safety are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MSA Safety may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Verisk Analytics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verisk Analytics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Verisk Analytics is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MSA Safety and Verisk Analytics

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

The idea behind MSA Safety and Verisk Analytics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.