Correlation Between MSCI and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both MSCI 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 MSCI and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSCI Inc and Morgan Stanley, you can compare the effects of market volatilities on MSCI 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 MSCI with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI and Morgan Stanley.
Diversification Opportunities for MSCI and Morgan Stanley
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MSCI and Morgan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and MSCI 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 MSCI Inc 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 has no effect on the direction of MSCI i.e., MSCI and Morgan Stanley go up and down completely randomly.
Pair Corralation between MSCI and Morgan Stanley
Assuming the 90 days horizon MSCI is expected to generate 1.6 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, MSCI Inc is 2.47 times less risky than Morgan Stanley. It trades about 0.32 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 10,708 in Morgan Stanley on September 1, 2024 and sell it today you would earn a total of 1,804 from holding Morgan Stanley or generate 16.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MSCI Inc vs. Morgan Stanley
Performance |
| Timeline |
| MSCI Inc |
| Morgan Stanley |
MSCI and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSCI and Morgan Stanley
The main advantage of trading using opposite MSCI and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSCI 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.| MSCI vs. Harmony Gold Mining | MSCI vs. GREENX METALS LTD | MSCI vs. FORMPIPE SOFTWARE AB | MSCI vs. Cleanaway Waste Management |
| Morgan Stanley vs. Morgan Stanley | Morgan Stanley vs. The Goldman Sachs | Morgan Stanley vs. Superior Plus Corp | Morgan Stanley vs. NMI Holdings |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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