Correlation Between Marchex and Morgan Stanley

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

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

Diversification Opportunities for Marchex and Morgan Stanley

0.48

Correlation Coefficient

Marchex  Morgan Stanley

Very weak diversification

The 3 months correlation between Marchex and Morgan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Marchex and Morgan Stanley Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Direct and Marchex 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 Marchex 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 Direct has no effect on the direction of Marchex i.e., Marchex and Morgan Stanley go up and down completely randomly.

Pair Corralation between Marchex and Morgan Stanley

Given the investment horizon of 90 days Marchex is expected to generate 3.78 times more return on investment than Morgan Stanley. However, Marchex is 3.78 times more volatile than Morgan Stanley Direct. It trades about 0.06 of its potential returns per unit of risk. Morgan Stanley Direct is currently generating about 0.09 per unit of risk. If you would invest  178.00  in Marchex on September 21, 2024 and sell it today you would earn a total of  20.00  from holding Marchex or generate 11.24% return on investment over 90 days.

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

Marchex  vs.  Morgan Stanley Direct

Marchex

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Marchex showed solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley Direct

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Marchex and Morgan Stanley

The main advantage of trading using opposite Marchex and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marchex 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 Marchex and Morgan Stanley Direct 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.