Correlation Between Morgan Stanley and Papaya Growth

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

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

Diversification Opportunities for Morgan Stanley and Papaya Growth

0.37

Correlation Coefficient

Morgan Stanley  Papaya Growth

Weak diversification

The 3 months correlation between Morgan and Papaya is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth 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 are associated (or correlated) with Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Papaya Growth go up and down completely randomly.

Pair Corralation between Morgan Stanley and Papaya Growth

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 5.06 times more return on investment than Papaya Growth. However, Morgan Stanley is 5.06 times more volatile than Papaya Growth Opportunity. It trades about 0.15 of its potential returns per unit of risk. Papaya Growth Opportunity is currently generating about -0.04 per unit of risk. If you would invest  11,140  in Morgan Stanley on September 13, 2024 and sell it today you would earn a total of  1,621  from holding Morgan Stanley or generate 14.55% return on investment over 90 days.

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

Morgan Stanley  vs.  Papaya Growth Opportunity

Morgan Stanley

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Morgan Stanley and Papaya Growth

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

The idea behind Morgan Stanley and Papaya Growth Opportunity 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.