Correlation Between Morgan Stanley and Valiant Holding

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

Diversification Opportunities for Morgan Stanley and Valiant Holding

0.85

Correlation Coefficient

Morgan Stanley  Valiant Holding

Very poor diversification

The 3 months correlation between Morgan and Valiant is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Valiant Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valiant Holding AG 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 Valiant Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valiant Holding AG has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Valiant Holding go up and down completely randomly.

Pair Corralation between Morgan Stanley and Valiant Holding

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.27 times more return on investment than Valiant Holding. However, Morgan Stanley is 1.27 times more volatile than Valiant Holding AG. It trades about 0.14 of its potential returns per unit of risk. Valiant Holding AG is currently generating about 0.06 per unit of risk. If you would invest  1,929  in Morgan Stanley Direct on September 26, 2024 and sell it today you would earn a total of  172.00  from holding Morgan Stanley Direct or generate 8.92% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Valiant Holding AG

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

Valiant Holding AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valiant Holding AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Valiant Holding is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Morgan Stanley and Valiant Holding

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

The idea behind Morgan Stanley Direct and Valiant Holding AG 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.