Correlation Between Global Fixed and Morgan Stanley

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

Diversification Opportunities for Global Fixed and Morgan Stanley

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Global and Morgan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global Fixed Income and Morgan Stanley European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley European and Global Fixed 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 Global 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 European has no effect on the direction of Global Fixed i.e., Global Fixed and Morgan Stanley go up and down completely randomly.

Pair Corralation between Global Fixed and Morgan Stanley

Assuming the 90 days horizon Global Fixed is expected to generate 2.27 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Global Fixed Income is 5.43 times less risky than Morgan Stanley. It trades about 0.15 of its potential returns per unit of risk. Morgan Stanley European is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,163  in Morgan Stanley European on September 14, 2024 and sell it today you would earn a total of  331.00  from holding Morgan Stanley European or generate 15.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Global Fixed Income  vs.  Morgan Stanley European

 Performance 
       Timeline  
Global Fixed Income 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Global Fixed Income are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Morgan Stanley European 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley European are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Global Fixed and Morgan Stanley Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global Fixed and Morgan Stanley

The main advantage of trading using opposite Global Fixed and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fixed 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 Global Fixed Income and Morgan Stanley European 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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