Correlation Between Morgan Stanley and Singapore Exchange

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

Diversification Opportunities for Morgan Stanley and Singapore Exchange

-0.2

Correlation Coefficient

Morgan Stanley  Singapore Exchange

Good diversification

The 3 months correlation between Morgan and Singapore is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Singapore Exchange Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange 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 Singapore Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Exchange has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Singapore Exchange go up and down completely randomly.

Pair Corralation between Morgan Stanley and Singapore Exchange

Given the investment horizon of 90 days Morgan Stanley is expected to generate 212.43 times less return on investment than Singapore Exchange. But when comparing it to its historical volatility, Morgan Stanley Direct is 125.09 times less risky than Singapore Exchange. It trades about 0.09 of its potential returns per unit of risk. Singapore Exchange Ltd is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Singapore Exchange Ltd on September 21, 2024 and sell it today you would earn a total of  208.00  from holding Singapore Exchange Ltd or generate 12.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Morgan Stanley Direct  vs.  Singapore Exchange Ltd

Morgan Stanley Direct

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Singapore Exchange

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Ltd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Singapore Exchange showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Singapore Exchange

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

The idea behind Morgan Stanley Direct and Singapore Exchange Ltd 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.