Correlation Between Morgan Stanley and FAM

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

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

Diversification Opportunities for Morgan Stanley and FAM

0.07

Correlation Coefficient

Morgan Stanley  FAM

Significant diversification

The 3 months correlation between Morgan and FAM is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Emerging and FAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAM 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 Emerging are associated (or correlated) with FAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAM has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and FAM go up and down completely randomly.

Pair Corralation between Morgan Stanley and FAM

If you would invest  764.00  in Morgan Stanley Emerging on September 2, 2024 and sell it today you would earn a total of  15.00  from holding Morgan Stanley Emerging or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Morgan Stanley Emerging  vs.  FAM

Morgan Stanley Emerging

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Emerging are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

FAM

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days FAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain basic indicators, FAM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and FAM

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

The idea behind Morgan Stanley Emerging and FAM 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.