Correlation Between Morgan Stanley and Ningbo Bird

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Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Ningbo Bird 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 Ningbo Bird 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 Ningbo Bird Co, you can compare the effects of market volatilities on Morgan Stanley and Ningbo Bird 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 Ningbo Bird. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Ningbo Bird.

Diversification Opportunities for Morgan Stanley and Ningbo Bird

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Morgan and Ningbo is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Ningbo Bird Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Bird 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 Ningbo Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Bird has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Ningbo Bird go up and down completely randomly.

Pair Corralation between Morgan Stanley and Ningbo Bird

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.22 times more return on investment than Ningbo Bird. However, Morgan Stanley Direct is 4.61 times less risky than Ningbo Bird. It trades about 0.18 of its potential returns per unit of risk. Ningbo Bird Co is currently generating about -0.03 per unit of risk. If you would invest  1,979  in Morgan Stanley Direct on September 30, 2024 and sell it today you would earn a total of  156.00  from holding Morgan Stanley Direct or generate 7.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Morgan Stanley Direct  vs.  Ningbo Bird Co

 Performance 
       Timeline  
Morgan Stanley Direct 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Ningbo Bird 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Bird Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Bird sustained solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley and Ningbo Bird Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Morgan Stanley and Ningbo Bird

The main advantage of trading using opposite Morgan Stanley and Ningbo Bird positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Ningbo Bird 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 Ningbo Bird will offset losses from the drop in Ningbo Bird's long position.
The idea behind Morgan Stanley Direct and Ningbo Bird Co 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.
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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