Correlation Between Morgan Stanley and Infimer

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

Diversification Opportunities for Morgan Stanley and Infimer

-0.06

Correlation Coefficient

Morgan Stanley  Infimer

Good diversification

The 3 months correlation between Morgan and Infimer is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Infimer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infimer 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 Infimer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infimer has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Infimer go up and down completely randomly.

Pair Corralation between Morgan Stanley and Infimer

Given the investment horizon of 90 days Morgan Stanley is expected to generate 859.94 times less return on investment than Infimer. But when comparing it to its historical volatility, Morgan Stanley Direct is 371.32 times less risky than Infimer. It trades about 0.16 of its potential returns per unit of risk. Infimer is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  4,700  in Infimer on September 17, 2024 and sell it today you would earn a total of  2,084,300  from holding Infimer or generate 44346.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.88%
Values	Daily Returns

Morgan Stanley Direct  vs.  Infimer

Morgan Stanley Direct

Risk-Adjusted Performance

12 of 100

OK

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.

Infimer

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Infimer are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Infimer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Infimer

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

The idea behind Morgan Stanley Direct and Infimer 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.