Correlation Between XTRA Bitcoin and Morgan Stanley

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

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

Diversification Opportunities for XTRA Bitcoin and Morgan Stanley

-0.19

Correlation Coefficient

XTRA Bitcoin  Morgan Stanley

Good diversification

The 3 months correlation between XTRA and Morgan is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding XTRA Bitcoin and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and XTRA Bitcoin 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 XTRA Bitcoin 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 XTRA Bitcoin i.e., XTRA Bitcoin and Morgan Stanley go up and down completely randomly.

Pair Corralation between XTRA Bitcoin and Morgan Stanley

Given the investment horizon of 90 days XTRA Bitcoin is expected to generate 24.12 times more return on investment than Morgan Stanley. However, XTRA Bitcoin is 24.12 times more volatile than Morgan Stanley. It trades about 0.08 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.04 per unit of risk. If you would invest  0.11  in XTRA Bitcoin on September 11, 2024 and sell it today you would earn a total of  0.02  from holding XTRA Bitcoin or generate 18.18% return on investment over 90 days.

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

XTRA Bitcoin  vs.  Morgan Stanley

XTRA Bitcoin

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XTRA Bitcoin are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, XTRA Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with XTRA Bitcoin and Morgan Stanley

The main advantage of trading using opposite XTRA Bitcoin and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XTRA Bitcoin 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 XTRA Bitcoin 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.