Correlation Between Morgan Stanley and Elma Electronic

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

Diversification Opportunities for Morgan Stanley and Elma Electronic

0.78

Correlation Coefficient

Morgan Stanley  Elma Electronic

Poor diversification

The 3 months correlation between Morgan and Elma is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Elma Electronic AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elma Electronic AG 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 Elma Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elma Electronic AG has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Elma Electronic go up and down completely randomly.

Pair Corralation between Morgan Stanley and Elma Electronic

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.63 times less return on investment than Elma Electronic. In addition to that, Morgan Stanley is 1.27 times more volatile than Elma Electronic AG. It trades about 0.11 of its total potential returns per unit of risk. Elma Electronic AG is currently generating about 0.22 per unit of volatility. If you would invest  102,000  in Elma Electronic AG on September 20, 2024 and sell it today you would earn a total of  3,000  from holding Elma Electronic AG or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	26.98%
Values	Daily Returns

Morgan Stanley Direct  vs.  Elma Electronic AG

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) 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.

Elma Electronic AG

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Elma Electronic AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Elma Electronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Elma Electronic

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

The idea behind Morgan Stanley Direct and Elma Electronic AG 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 Stocks Directory module to find actively traded stocks across global markets.