Correlation Between Morgan Stanley and Xtrackers Nifty

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

Diversification Opportunities for Morgan Stanley and Xtrackers Nifty

0.16

Correlation Coefficient

Morgan Stanley  Xtrackers Nifty

Average diversification

The 3 months correlation between Morgan and Xtrackers is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Xtrackers Nifty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Nifty 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 Xtrackers Nifty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Nifty has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Xtrackers Nifty go up and down completely randomly.

Pair Corralation between Morgan Stanley and Xtrackers Nifty

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.09 times more return on investment than Xtrackers Nifty. However, Morgan Stanley is 1.09 times more volatile than Xtrackers Nifty. It trades about 0.16 of its potential returns per unit of risk. Xtrackers Nifty is currently generating about 0.05 per unit of risk. If you would invest  1,934  in Morgan Stanley Direct on September 17, 2024 and sell it today you would earn a total of  184.00  from holding Morgan Stanley Direct or generate 9.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Morgan Stanley Direct  vs.  Xtrackers Nifty

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.

Xtrackers Nifty

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Nifty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers Nifty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Morgan Stanley and Xtrackers Nifty

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

The idea behind Morgan Stanley Direct and Xtrackers Nifty 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.