Correlation Between Morgan Stanley and StateHouse Holdings

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

Diversification Opportunities for Morgan Stanley and StateHouse Holdings

-0.33

Correlation Coefficient

Morgan Stanley  StateHouse Holdings

Very good diversification

The 3 months correlation between Morgan and StateHouse is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and StateHouse Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StateHouse Holdings 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 StateHouse Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StateHouse Holdings has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and StateHouse Holdings go up and down completely randomly.

Pair Corralation between Morgan Stanley and StateHouse Holdings

Given the investment horizon of 90 days Morgan Stanley is expected to generate 3.42 times less return on investment than StateHouse Holdings. But when comparing it to its historical volatility, Morgan Stanley Direct is 9.43 times less risky than StateHouse Holdings. It trades about 0.14 of its potential returns per unit of risk. StateHouse Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.50  in StateHouse Holdings on September 18, 2024 and sell it today you would earn a total of  0.00  from holding StateHouse Holdings or generate 0.0% 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.  StateHouse Holdings

Morgan Stanley Direct

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 11 (%) 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.

StateHouse Holdings

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in StateHouse Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, StateHouse Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and StateHouse Holdings

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

The idea behind Morgan Stanley Direct and StateHouse Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.