Correlation Between Morgan Stanley and MFS Investment

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Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and MFS Investment 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 MFS Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley China and MFS Investment Grade, you can compare the effects of market volatilities on Morgan Stanley and MFS Investment 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 MFS Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and MFS Investment.

Diversification Opportunities for Morgan Stanley and MFS Investment

0.33
  Correlation Coefficient

Weak diversification

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

Pair Corralation between Morgan Stanley and MFS Investment

Considering the 90-day investment horizon Morgan Stanley China is expected to under-perform the MFS Investment. In addition to that, Morgan Stanley is 3.72 times more volatile than MFS Investment Grade. It trades about -0.12 of its total potential returns per unit of risk. MFS Investment Grade is currently generating about 0.11 per unit of volatility. If you would invest  800.00  in MFS Investment Grade on August 25, 2024 and sell it today you would earn a total of  10.00  from holding MFS Investment Grade or generate 1.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Morgan Stanley China  vs.  MFS Investment Grade

 Performance 
       Timeline  
Morgan Stanley China 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley China are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly inconsistent basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in December 2024.
MFS Investment Grade 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Morgan Stanley and MFS Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Morgan Stanley and MFS Investment

The main advantage of trading using opposite Morgan Stanley and MFS Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, MFS Investment 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 MFS Investment will offset losses from the drop in MFS Investment's long position.
The idea behind Morgan Stanley China and MFS Investment Grade 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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