Correlation Between Dow Jones and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Morgan Stanley ETF, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Morgan Stanley.
Diversification Opportunities for Dow Jones and Morgan Stanley
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Morgan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and Dow Jones 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 Dow Jones Industrial 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 ETF has no effect on the direction of Dow Jones i.e., Dow Jones and Morgan Stanley go up and down completely randomly.
Pair Corralation between Dow Jones and Morgan Stanley
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 8.2 times more return on investment than Morgan Stanley. However, Dow Jones is 8.2 times more volatile than Morgan Stanley ETF. It trades about 0.1 of its potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.21 per unit of risk. If you would invest 4,290,695 in Dow Jones Industrial on October 22, 2024 and sell it today you would earn a total of 58,088 from holding Dow Jones Industrial or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Morgan Stanley ETF
Performance |
| Timeline |
Dow Jones and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Morgan Stanley ETF
Pair trading matchups for Morgan Stanley
Pair Trading with Dow Jones and Morgan Stanley
The main advantage of trading using opposite Dow Jones and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Nasdaq Inc | Dow Jones vs. Summit Materials | Dow Jones vs. Vulcan Materials | Dow Jones vs. Celsius Holdings |
| Morgan Stanley vs. VanEck Vectors Moodys | Morgan Stanley vs. Valued Advisers Trust | Morgan Stanley vs. Xtrackers California Municipal | Morgan Stanley vs. Principal Exchange Traded Funds |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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