Correlation Between Morgan Stanley and FT Vest

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and FT Vest 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 FT Vest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morgan Stanley ETF and FT Vest Dow, you can compare the effects of market volatilities on Morgan Stanley and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and FT Vest.

Diversification Opportunities for Morgan Stanley and FT Vest

0.89

Correlation Coefficient

Morgan Stanley  FT Vest

Very poor diversification

The 3 months correlation between Morgan and FDND is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley ETF and FT Vest Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Dow 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 ETF are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Dow has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and FT Vest go up and down completely randomly.

Pair Corralation between Morgan Stanley and FT Vest

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.69 times less return on investment than FT Vest. But when comparing it to its historical volatility, Morgan Stanley ETF is 1.82 times less risky than FT Vest. It trades about 0.3 of its potential returns per unit of risk. FT Vest Dow is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  2,069  in FT Vest Dow on September 5, 2024 and sell it today you would earn a total of  254.00  from holding FT Vest Dow or generate 12.28% return on investment over 90 days.

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

Morgan Stanley ETF  vs.  FT Vest Dow

Morgan Stanley ETF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

FT Vest Dow

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Dow are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, FT Vest exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and FT Vest

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

The idea behind Morgan Stanley ETF and FT Vest Dow 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.