Correlation Between New Perspective and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both New Perspective 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 New Perspective and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Perspective Fund and Morgan Stanley Global, you can compare the effects of market volatilities on New Perspective 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 New Perspective with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Morgan Stanley.
Diversification Opportunities for New Perspective and Morgan Stanley
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Morgan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Morgan Stanley Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Global and New Perspective 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 New Perspective Fund 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 Global has no effect on the direction of New Perspective i.e., New Perspective and Morgan Stanley go up and down completely randomly.
Pair Corralation between New Perspective and Morgan Stanley
Assuming the 90 days horizon New Perspective Fund is expected to generate 0.94 times more return on investment than Morgan Stanley. However, New Perspective Fund is 1.06 times less risky than Morgan Stanley. It trades about 0.08 of its potential returns per unit of risk. Morgan Stanley Global is currently generating about 0.06 per unit of risk. If you would invest 5,924 in New Perspective Fund on September 2, 2024 and sell it today you would earn a total of 491.00 from holding New Perspective Fund or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Perspective Fund vs. Morgan Stanley Global
Performance |
| Timeline |
| New Perspective |
| Morgan Stanley Global |
New Perspective and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and Morgan Stanley
The main advantage of trading using opposite New Perspective and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective 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.| New Perspective vs. Prudential Core Conservative | New Perspective vs. Western Asset Diversified | New Perspective vs. Oppenheimer International Diversified | New Perspective vs. Aqr Diversified Arbitrage |
| Morgan Stanley vs. Emerging Markets Equity | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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