Correlation Between Armada Mercantile and Morgan Stanley

Can any of the company-specific risk be diversified away by investing in both Armada Mercantile and Morgan Stanley 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 Armada Mercantile and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Armada Mercantile and Morgan Stanley

0.14

Correlation Coefficient

Armada Mercantile  Morgan Stanley

Average diversification

The 3 months correlation between Armada and Morgan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Armada Mercantile and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Armada Mercantile 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 Armada Mercantile are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Armada Mercantile i.e., Armada Mercantile and Morgan Stanley go up and down completely randomly.

Pair Corralation between Armada Mercantile and Morgan Stanley

Assuming the 90 days horizon Armada Mercantile is expected to generate 5.55 times more return on investment than Morgan Stanley. However, Armada Mercantile is 5.55 times more volatile than Morgan Stanley. It trades about 0.01 of its potential returns per unit of risk. Morgan Stanley is currently generating about -0.04 per unit of risk. If you would invest  34.00  in Armada Mercantile on September 30, 2024 and sell it today you would lose (4.00) from holding Armada Mercantile or give up 11.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Armada Mercantile  vs.  Morgan Stanley

Armada Mercantile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Mercantile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Armada Mercantile is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Morgan Stanley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Preferred Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Armada Mercantile and Morgan Stanley

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

The idea behind Armada Mercantile and Morgan Stanley 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.