Correlation Between MSC Industrial and Global Industrial

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

Diversification Opportunities for MSC Industrial and Global Industrial

0.37

Correlation Coefficient

MSC Industrial  Global Industrial

Weak diversification

The 3 months correlation between MSC and Global is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding MSC Industrial Direct and Global Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Industrial 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 Global Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Industrial has no effect on the direction of MSC Industrial i.e., MSC Industrial and Global Industrial go up and down completely randomly.

Pair Corralation between MSC Industrial and Global Industrial

Considering the 90-day investment horizon MSC Industrial Direct is expected to under-perform the Global Industrial. But the stock apears to be less risky and, when comparing its historical volatility, MSC Industrial Direct is 1.27 times less risky than Global Industrial. The stock trades about -0.02 of its potential returns per unit of risk. The Global Industrial Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,342  in Global Industrial Co on February 10, 2025 and sell it today you would earn a total of  239.00  from holding Global Industrial Co or generate 10.2% return on investment over 90 days.

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

MSC Industrial Direct  vs.  Global Industrial Co

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.

Global Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Industrial Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Global Industrial may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with MSC Industrial and Global Industrial

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

The idea behind MSC Industrial Direct and Global Industrial Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.