Correlation Between Arrow Managed and Morgan Stanley

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

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

Diversification Opportunities for Arrow Managed and Morgan Stanley

0.37

Correlation Coefficient

Arrow Managed  Morgan Stanley

Weak diversification

The 3 months correlation between Arrow and Morgan is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures and Morgan Stanley Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Multi and Arrow Managed 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 Arrow Managed Futures 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 Multi has no effect on the direction of Arrow Managed i.e., Arrow Managed and Morgan Stanley go up and down completely randomly.

Pair Corralation between Arrow Managed and Morgan Stanley

Assuming the 90 days horizon Arrow Managed is expected to generate 99.7 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Arrow Managed Futures is 1.48 times less risky than Morgan Stanley. It trades about 0.0 of its potential returns per unit of risk. Morgan Stanley Multi is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,996  in Morgan Stanley Multi on September 25, 2024 and sell it today you would earn a total of  985.00  from holding Morgan Stanley Multi or generate 32.88% return on investment over 90 days.

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

Arrow Managed Futures  vs.  Morgan Stanley Multi

Arrow Managed Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Managed Futures has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Arrow Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Morgan Stanley Multi

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Multi are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Managed and Morgan Stanley

The main advantage of trading using opposite Arrow Managed and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Managed 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 Arrow Managed Futures and Morgan Stanley Multi 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.