Correlation Between Eaton Vance and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Eaton Vance 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 Eaton Vance and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton Vance Greater and Morgan Stanley India, you can compare the effects of market volatilities on Eaton Vance 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 Eaton Vance with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Morgan Stanley.
Diversification Opportunities for Eaton Vance and Morgan Stanley
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eaton and Morgan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Greater and Morgan Stanley India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley India and Eaton Vance 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 Eaton Vance Greater 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 India has no effect on the direction of Eaton Vance i.e., Eaton Vance and Morgan Stanley go up and down completely randomly.
Pair Corralation between Eaton Vance and Morgan Stanley
Assuming the 90 days horizon Eaton Vance is expected to generate 1.45 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Eaton Vance Greater is 1.06 times less risky than Morgan Stanley. It trades about 0.08 of its potential returns per unit of risk. Morgan Stanley India is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,836 in Morgan Stanley India on September 3, 2024 and sell it today you would earn a total of 985.00 from holding Morgan Stanley India or generate 53.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton Vance Greater vs. Morgan Stanley India
Performance |
| Timeline |
| Eaton Vance Greater |
| Morgan Stanley India |
Eaton Vance and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton Vance and Morgan Stanley
The main advantage of trading using opposite Eaton Vance and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Vance 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 Eaton Vance Greater and Morgan Stanley India 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. Tekla Healthcare Investors | Morgan Stanley vs. Tekla Life Sciences | Morgan Stanley vs. Cohen Steers Reit | Morgan Stanley vs. XAI Octagon Floating |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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