Correlation Between Morgan Stanley and Xian International

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

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

Diversification Opportunities for Morgan Stanley and Xian International

0.76

Correlation Coefficient

Morgan Stanley  Xian International

Poor diversification

The 3 months correlation between Morgan and Xian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Xian International Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xian International 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 Direct are associated (or correlated) with Xian International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xian International has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Xian International go up and down completely randomly.

Pair Corralation between Morgan Stanley and Xian International

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.52 times less return on investment than Xian International. But when comparing it to its historical volatility, Morgan Stanley Direct is 2.54 times less risky than Xian International. It trades about 0.17 of its potential returns per unit of risk. Xian International Medical is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  557.00  in Xian International Medical on September 17, 2024 and sell it today you would earn a total of  46.00  from holding Xian International Medical or generate 8.26% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Xian International Medical

Morgan Stanley Direct

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xian International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xian International Medical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xian International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Xian International

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

The idea behind Morgan Stanley Direct and Xian International Medical 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.