Correlation Between Morgan Stanley and Global Opportunity

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

By analyzing existing cross correlation between Morgan Stanley Insti and Global Opportunity Portfolio, you can compare the effects of market volatilities on Morgan Stanley and Global Opportunity 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 Global Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Global Opportunity.

Diversification Opportunities for Morgan Stanley and Global Opportunity

0.76

Correlation Coefficient

Morgan Stanley  Global Opportunity

Poor diversification

The 3 months correlation between Morgan and Global is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Insti and Global Opportunity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Opportunity 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 Insti are associated (or correlated) with Global Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunity has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Global Opportunity go up and down completely randomly.

Pair Corralation between Morgan Stanley and Global Opportunity

Assuming the 90 days horizon Morgan Stanley is expected to generate 1.14 times less return on investment than Global Opportunity. But when comparing it to its historical volatility, Morgan Stanley Insti is 1.03 times less risky than Global Opportunity. It trades about 0.11 of its potential returns per unit of risk. Global Opportunity Portfolio is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,876  in Global Opportunity Portfolio on September 14, 2024 and sell it today you would earn a total of  1,079  from holding Global Opportunity Portfolio or generate 37.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Morgan Stanley Insti  vs.  Global Opportunity Portfolio

Morgan Stanley Insti

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Insti are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global Opportunity

Risk-Adjusted Performance

20 of 100

Solid

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

Pair Trading with Morgan Stanley and Global Opportunity

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

The idea behind Morgan Stanley Insti and Global Opportunity Portfolio 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.