Correlation Between Oil Gas and Morgan Stanley

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

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

Diversification Opportunities for Oil Gas and Morgan Stanley

0.78

Correlation Coefficient

Oil Gas  Morgan Stanley

Poor diversification

The 3 months correlation between Oil and Morgan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Oil Gas Ultrasector and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Oil Gas 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 Oil Gas Ultrasector 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 Insti has no effect on the direction of Oil Gas i.e., Oil Gas and Morgan Stanley go up and down completely randomly.

Pair Corralation between Oil Gas and Morgan Stanley

Assuming the 90 days horizon Oil Gas Ultrasector is expected to under-perform the Morgan Stanley. In addition to that, Oil Gas is 1.98 times more volatile than Morgan Stanley Institutional. It trades about -0.23 of its total potential returns per unit of risk. Morgan Stanley Institutional is currently generating about 0.01 per unit of volatility. If you would invest  1,259  in Morgan Stanley Institutional on September 12, 2024 and sell it today you would earn a total of  2.00  from holding Morgan Stanley Institutional or generate 0.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Oil Gas Ultrasector  vs.  Morgan Stanley Institutional

Oil Gas Ultrasector

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Gas Ultrasector are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oil Gas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Morgan Stanley Insti

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Institutional are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oil Gas and Morgan Stanley

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