Correlation Between Morgan Stanley and Global Strategist

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

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

Diversification Opportunities for Morgan Stanley and Global Strategist

0.67

Correlation Coefficient

Morgan Stanley  Global Strategist

Poor diversification

The 3 months correlation between Morgan and Global is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Mortgage and Global Strategist Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Strategist 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 Mortgage are associated (or correlated) with Global Strategist. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Strategist has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Global Strategist go up and down completely randomly.

Pair Corralation between Morgan Stanley and Global Strategist

Assuming the 90 days horizon Morgan Stanley Mortgage is expected to generate 0.62 times more return on investment than Global Strategist. However, Morgan Stanley Mortgage is 1.6 times less risky than Global Strategist. It trades about -0.03 of its potential returns per unit of risk. Global Strategist Portfolio is currently generating about -0.04 per unit of risk. If you would invest  772.00  in Morgan Stanley Mortgage on September 16, 2024 and sell it today you would lose (4.00) from holding Morgan Stanley Mortgage or give up 0.52% of portfolio value over 90 days.

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

Morgan Stanley Mortgage  vs.  Global Strategist Portfolio

Morgan Stanley Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global Strategist

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Morgan Stanley and Global Strategist

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

The idea behind Morgan Stanley Mortgage and Global Strategist 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.