Correlation Between Morgan Stanley and Ark Restaurants

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

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

Diversification Opportunities for Morgan Stanley and Ark Restaurants

-0.27

Correlation Coefficient

Morgan Stanley  Ark Restaurants

Very good diversification

The 3 months correlation between Morgan and Ark is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp 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 are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Ark Restaurants go up and down completely randomly.

Pair Corralation between Morgan Stanley and Ark Restaurants

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 0.42 times more return on investment than Ark Restaurants. However, Morgan Stanley is 2.39 times less risky than Ark Restaurants. It trades about 0.21 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about 0.03 per unit of risk. If you would invest  9,906  in Morgan Stanley on September 17, 2024 and sell it today you would earn a total of  2,997  from holding Morgan Stanley or generate 30.25% return on investment over 90 days.

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

Morgan Stanley  vs.  Ark Restaurants Corp

Morgan Stanley

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ark Restaurants Corp

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Ark Restaurants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Ark Restaurants

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

The idea behind Morgan Stanley and Ark Restaurants Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.