Correlation Between First Ship and MORGAN

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Can any of the company-specific risk be diversified away by investing in both First Ship and MORGAN 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 First Ship and MORGAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Ship Lease and MORGAN STANLEY 395, you can compare the effects of market volatilities on First Ship and MORGAN 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 First Ship with a short position of MORGAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Ship and MORGAN.

Diversification Opportunities for First Ship and MORGAN

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between First and MORGAN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Ship Lease and MORGAN STANLEY 395 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MORGAN STANLEY 5 and First Ship 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 First Ship Lease are associated (or correlated) with MORGAN. 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 5 has no effect on the direction of First Ship i.e., First Ship and MORGAN go up and down completely randomly.

Pair Corralation between First Ship and MORGAN

Assuming the 90 days horizon First Ship Lease is expected to generate 5.21 times more return on investment than MORGAN. However, First Ship is 5.21 times more volatile than MORGAN STANLEY 395. It trades about 0.04 of its potential returns per unit of risk. MORGAN STANLEY 395 is currently generating about 0.01 per unit of risk. If you would invest  2.50  in First Ship Lease on September 14, 2024 and sell it today you would earn a total of  1.50  from holding First Ship Lease or generate 60.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

First Ship Lease  vs.  MORGAN STANLEY 395

 Performance 
       Timeline  
First Ship Lease 

Risk-Adjusted Performance

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Over the last 90 days First Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Ship is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
MORGAN STANLEY 5 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days MORGAN STANLEY 395 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MORGAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Ship and MORGAN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Ship and MORGAN

The main advantage of trading using opposite First Ship and MORGAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ship position performs unexpectedly, MORGAN 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 will offset losses from the drop in MORGAN's long position.
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The idea behind First Ship Lease and MORGAN STANLEY 395 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.
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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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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