Correlation Between Morgan Stanley and Kimia Farma

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

Diversification Opportunities for Morgan Stanley and Kimia Farma

-0.71

Correlation Coefficient

Morgan Stanley  Kimia Farma

Pay attention - limited upside

The 3 months correlation between Morgan and Kimia is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Kimia Farma Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimia Farma Persero 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 Kimia Farma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimia Farma Persero has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Kimia Farma go up and down completely randomly.

Pair Corralation between Morgan Stanley and Kimia Farma

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.45 times more return on investment than Kimia Farma. However, Morgan Stanley Direct is 2.24 times less risky than Kimia Farma. It trades about 0.14 of its potential returns per unit of risk. Kimia Farma Persero is currently generating about -0.11 per unit of risk. If you would invest  1,953  in Morgan Stanley Direct on September 16, 2024 and sell it today you would earn a total of  165.00  from holding Morgan Stanley Direct or generate 8.45% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Kimia Farma Persero

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

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 unfluctuating fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kimia Farma Persero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimia Farma Persero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Morgan Stanley and Kimia Farma

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

The idea behind Morgan Stanley Direct and Kimia Farma Persero 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.