Correlation Between Dimensional International and Morgan Stanley

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

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

Diversification Opportunities for Dimensional International and Morgan Stanley

-0.59

Correlation Coefficient

Dimensional International  Morgan Stanley

Excellent diversification

The 3 months correlation between Dimensional and Morgan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and Dimensional International 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 Dimensional International High 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 ETF has no effect on the direction of Dimensional International i.e., Dimensional International and Morgan Stanley go up and down completely randomly.

Pair Corralation between Dimensional International and Morgan Stanley

Given the investment horizon of 90 days Dimensional International High is expected to under-perform the Morgan Stanley. In addition to that, Dimensional International is 2.62 times more volatile than Morgan Stanley ETF. It trades about -0.05 of its total potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.25 per unit of volatility. If you would invest  2,842  in Morgan Stanley ETF on September 12, 2024 and sell it today you would earn a total of  137.00  from holding Morgan Stanley ETF or generate 4.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Dimensional International High  vs.  Morgan Stanley ETF

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International High has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Dimensional International is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Morgan Stanley ETF

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley ETF are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dimensional International and Morgan Stanley

The main advantage of trading using opposite Dimensional International and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International 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 Dimensional International High and Morgan Stanley ETF 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.