Correlation Between Morgan Stanley and Heineken Holding

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

Diversification Opportunities for Morgan Stanley and Heineken Holding

-0.87
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Morgan and Heineken is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Heineken Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken Holding 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 Heineken Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken Holding has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Heineken Holding go up and down completely randomly.

Pair Corralation between Morgan Stanley and Heineken Holding

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.92 times more return on investment than Heineken Holding. However, Morgan Stanley Direct is 1.09 times less risky than Heineken Holding. It trades about 0.15 of its potential returns per unit of risk. Heineken Holding NV is currently generating about -0.21 per unit of risk. If you would invest  1,957  in Morgan Stanley Direct on September 18, 2024 and sell it today you would earn a total of  181.00  from holding Morgan Stanley Direct or generate 9.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

Morgan Stanley Direct  vs.  Heineken Holding NV

 Performance 
       Timeline  
Morgan Stanley Direct 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
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 weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Heineken Holding 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Heineken Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Morgan Stanley and Heineken Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Morgan Stanley and Heineken Holding

The main advantage of trading using opposite Morgan Stanley and Heineken Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Heineken Holding 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 Heineken Holding will offset losses from the drop in Heineken Holding's long position.
The idea behind Morgan Stanley Direct and Heineken Holding NV 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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