Correlation Between Morgan Stanley and Origin Agritech

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

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

Diversification Opportunities for Morgan Stanley and Origin Agritech

-0.1

Correlation Coefficient

Morgan Stanley  Origin Agritech

Good diversification

The 3 months correlation between Morgan and Origin is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech and Morgan Stanley 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 Morgan Stanley are associated (or correlated) with Origin Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Agritech has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Origin Agritech go up and down completely randomly.

Pair Corralation between Morgan Stanley and Origin Agritech

Assuming the 90 days trading horizon Morgan Stanley is expected to generate 0.48 times more return on investment than Origin Agritech. However, Morgan Stanley is 2.1 times less risky than Origin Agritech. It trades about 0.2 of its potential returns per unit of risk. Origin Agritech is currently generating about 0.03 per unit of risk. If you would invest  9,431  in Morgan Stanley on September 2, 2024 and sell it today you would earn a total of  3,081  from holding Morgan Stanley or generate 32.67% return on investment over 90 days.

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

Morgan Stanley  vs.  Origin Agritech

Morgan Stanley

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Origin Agritech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Origin Agritech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Origin Agritech

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

The idea behind Morgan Stanley and Origin Agritech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.