Correlation Between Parametric International and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Parametric International 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 Parametric International and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parametric International Equity and Morgan Stanley Global, you can compare the effects of market volatilities on Parametric International 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 Parametric International with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parametric International and Morgan Stanley.
Diversification Opportunities for Parametric International and Morgan Stanley
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Parametric and Morgan is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Parametric International Equit 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 Parametric International 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 Parametric International Equity 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 Parametric International i.e., Parametric International and Morgan Stanley go up and down completely randomly.
Pair Corralation between Parametric International and Morgan Stanley
Assuming the 90 days horizon Parametric International is expected to generate 1.27 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Parametric International Equity is 1.37 times less risky than Morgan Stanley. It trades about 0.05 of its potential returns per unit of risk. Morgan Stanley Global is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,111 in Morgan Stanley Global on August 27, 2024 and sell it today you would earn a total of 257.00 from holding Morgan Stanley Global or generate 23.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parametric International Equit vs. Morgan Stanley Global
Performance |
| Timeline |
| Parametric International |
| Morgan Stanley Global |
Parametric International and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parametric International and Morgan Stanley
The main advantage of trading using opposite Parametric International and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parametric International 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 Parametric International Equity and Morgan Stanley Global 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.
| Morgan Stanley vs. Emerging Markets Equity | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global E Portfolio |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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