Correlation Between Fidelity Small and Morgan Stanley

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

Diversification Opportunities for Fidelity Small and Morgan Stanley

FidelityMorganDiversified AwayFidelityMorganDiversified Away100%
0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fidelity and Morgan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Small Mid Factor and Morgan Stanley Pathway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Pathway and Fidelity Small 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 Fidelity Small Mid Factor 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 Pathway has no effect on the direction of Fidelity Small i.e., Fidelity Small and Morgan Stanley go up and down completely randomly.

Pair Corralation between Fidelity Small and Morgan Stanley

Given the investment horizon of 90 days Fidelity Small Mid Factor is expected to generate 0.95 times more return on investment than Morgan Stanley. However, Fidelity Small Mid Factor is 1.05 times less risky than Morgan Stanley. It trades about 0.21 of its potential returns per unit of risk. Morgan Stanley Pathway is currently generating about 0.1 per unit of risk. If you would invest  4,147  in Fidelity Small Mid Factor on November 5, 2024 and sell it today you would earn a total of  145.00  from holding Fidelity Small Mid Factor or generate 3.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Fidelity Small Mid Factor  vs.  Morgan Stanley Pathway

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -4-202468
JavaScript chart by amCharts 3.21.15FSMD MSSM
       Timeline  
Fidelity Small Mid 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Small Mid Factor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Fidelity Small is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanJanFeb4142434445
Morgan Stanley Pathway 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Morgan Stanley Pathway has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15Dec 09Dec 16Dec 23Dec 30Jan 06Jan 13Jan 21Jan 27Dec 16Dec 23Dec 30Jan 06Jan 13Jan 21Jan 27Feb 034646.54747.54848.54949.55050.5

Fidelity Small and Morgan Stanley Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.39-2.54-1.69-0.840.00.861.742.623.5 0.050.100.150.200.250.300.35
JavaScript chart by amCharts 3.21.15FSMD MSSM
       Returns  

Pair Trading with Fidelity Small and Morgan Stanley

The main advantage of trading using opposite Fidelity Small and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Small 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 Fidelity Small Mid Factor and Morgan Stanley Pathway 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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