Correlation Between American Funds and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Smallcap and Morgan Stanley Global, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Morgan Stanley.
Diversification Opportunities for American Funds and Morgan Stanley
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Morgan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Smallcap 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 American Funds 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 American Funds Smallcap 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 American Funds i.e., American Funds and Morgan Stanley go up and down completely randomly.
Pair Corralation between American Funds and Morgan Stanley
Assuming the 90 days horizon American Funds is expected to generate 1.2 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, American Funds Smallcap is 1.61 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 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,475 in Morgan Stanley Global on September 12, 2024 and sell it today you would earn a total of 253.00 from holding Morgan Stanley Global or generate 17.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
American Funds Smallcap vs. Morgan Stanley Global
Performance |
| Timeline |
| American Funds Smallcap |
| Morgan Stanley Global |
American Funds and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Morgan Stanley
The main advantage of trading using opposite American Funds and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. T Rowe Price | American Funds vs. Prudential High Yield | American Funds vs. City National Rochdale | American Funds vs. Strategic Advisers Income |
| Morgan Stanley vs. Prudential Government Income | Morgan Stanley vs. Intermediate Government Bond | Morgan Stanley vs. Payden Government Fund | Morgan Stanley vs. Franklin Adjustable Government |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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