Correlation Between Morgan Stanley and Barings Corporate

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

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

Diversification Opportunities for Morgan Stanley and Barings Corporate

0.7

Correlation Coefficient

Morgan Stanley  Barings Corporate

Poor diversification

The 3 months correlation between Morgan and Barings is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Barings Corporate Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Corporate 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 Barings Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Corporate has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Barings Corporate go up and down completely randomly.

Pair Corralation between Morgan Stanley and Barings Corporate

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.53 times more return on investment than Barings Corporate. However, Morgan Stanley is 1.53 times more volatile than Barings Corporate Investors. It trades about 0.21 of its potential returns per unit of risk. Barings Corporate Investors is currently generating about 0.06 per unit of risk. If you would invest  9,930  in Morgan Stanley on September 14, 2024 and sell it today you would earn a total of  2,861  from holding Morgan Stanley or generate 28.81% return on investment over 90 days.

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

Morgan Stanley  vs.  Barings Corporate Investors

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.

Barings Corporate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Corporate Investors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Barings Corporate is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Morgan Stanley and Barings Corporate

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

The idea behind Morgan Stanley and Barings Corporate Investors 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.