Correlation Between Inflation Linked and Morgan Stanley

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

By analyzing existing cross correlation between Inflation Linked Fixed Income and Morgan Stanley Insti, you can compare the effects of market volatilities on Inflation Linked and Morgan Stanley 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 Inflation Linked with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Linked and Morgan Stanley.

Diversification Opportunities for Inflation Linked and Morgan Stanley

-0.35

Correlation Coefficient

Inflation Linked  Morgan Stanley

Very good diversification

The 3 months correlation between Inflation and Morgan is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Linked Fixed Income and Morgan Stanley Insti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Inflation Linked 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 Inflation Linked Fixed Income are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Insti has no effect on the direction of Inflation Linked i.e., Inflation Linked and Morgan Stanley go up and down completely randomly.

Pair Corralation between Inflation Linked and Morgan Stanley

Assuming the 90 days horizon Inflation Linked Fixed Income is expected to under-perform the Morgan Stanley. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inflation Linked Fixed Income is 3.43 times less risky than Morgan Stanley. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Morgan Stanley Insti is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,787  in Morgan Stanley Insti on September 15, 2024 and sell it today you would earn a total of  201.00  from holding Morgan Stanley Insti or generate 7.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Inflation Linked Fixed Income  vs.  Morgan Stanley Insti

Inflation Linked Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inflation Linked Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Inflation Linked is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Morgan Stanley Insti

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Insti are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Inflation Linked and Morgan Stanley

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

The idea behind Inflation Linked Fixed Income and Morgan Stanley Insti 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.