Correlation Between Morgan Stanley and Numinus Wellness

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

Diversification Opportunities for Morgan Stanley and Numinus Wellness

0.41

Correlation Coefficient

Morgan Stanley  Numinus Wellness

Very weak diversification

The 3 months correlation between Morgan and Numinus is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Numinus Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Numinus Wellness 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 Numinus Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Numinus Wellness has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Numinus Wellness go up and down completely randomly.

Pair Corralation between Morgan Stanley and Numinus Wellness

Given the investment horizon of 90 days Morgan Stanley is expected to generate 10.42 times less return on investment than Numinus Wellness. But when comparing it to its historical volatility, Morgan Stanley Direct is 12.63 times less risky than Numinus Wellness. It trades about 0.1 of its potential returns per unit of risk. Numinus Wellness is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.36  in Numinus Wellness on September 23, 2024 and sell it today you would earn a total of  0.64  from holding Numinus Wellness or generate 27.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Numinus Wellness

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

Numinus Wellness

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Numinus Wellness are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Numinus Wellness reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Numinus Wellness

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

The idea behind Morgan Stanley Direct and Numinus Wellness 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.