Correlation Between Basic Materials and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Morgan Stanley, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Morgan Stanley.
Diversification Opportunities for Basic Materials and Morgan Stanley
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Basic and Morgan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Basic Materials 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 Basic Materials 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 has no effect on the direction of Basic Materials i.e., Basic Materials and Morgan Stanley go up and down completely randomly.
Pair Corralation between Basic Materials and Morgan Stanley
Assuming the 90 days trading horizon Basic Materials is expected to generate 8.79 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Basic Materials is 3.03 times less risky than Morgan Stanley. It trades about 0.09 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 13,366 in Morgan Stanley on August 24, 2024 and sell it today you would earn a total of 2,324 from holding Morgan Stanley or generate 17.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Basic Materials vs. Morgan Stanley
Performance |
| Timeline |
Basic Materials and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Morgan Stanley
Pair trading matchups for Morgan Stanley
Pair Trading with Basic Materials and Morgan Stanley
The main advantage of trading using opposite Basic Materials and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. TAL Education Group | Basic Materials vs. salesforce inc | Basic Materials vs. Apartment Investment and | Basic Materials vs. Bank of America |
| Morgan Stanley vs. T Mobile | Morgan Stanley vs. Verizon Communications | Morgan Stanley vs. UnitedHealth Group Incorporated | Morgan Stanley vs. Planet Fitness |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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