Correlation Between Morgan Stanley and China Steel
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and China Steel 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 China Steel 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 China Steel Structure, you can compare the effects of market volatilities on Morgan Stanley and China Steel 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 China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and China Steel.
Diversification Opportunities for Morgan Stanley and China Steel
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Morgan and China is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and China Steel Structure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Structure 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 China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Structure has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and China Steel go up and down completely randomly.
Pair Corralation between Morgan Stanley and China Steel
Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.63 times more return on investment than China Steel. However, Morgan Stanley is 1.63 times more volatile than China Steel Structure. It trades about 0.05 of its potential returns per unit of risk. China Steel Structure is currently generating about -0.5 per unit of risk. If you would invest 2,080 in Morgan Stanley Direct on September 25, 2024 and sell it today you would earn a total of 21.00 from holding Morgan Stanley Direct or generate 1.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Morgan Stanley Direct vs. China Steel Structure
Performance |
Timeline |
Morgan Stanley Direct |
China Steel Structure |
Morgan Stanley and China Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Morgan Stanley and China Steel
The main advantage of trading using opposite Morgan Stanley and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, China Steel 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 China Steel will offset losses from the drop in China Steel's long position.Morgan Stanley vs. Avient Corp | Morgan Stanley vs. Eastman Chemical | Morgan Stanley vs. NL Industries | Morgan Stanley vs. Molson Coors Brewing |
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Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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