Correlation Between Northern Lights and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Northern Lights 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 Northern Lights and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Morgan Stanley Pathway, you can compare the effects of market volatilities on Northern Lights 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 Northern Lights with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Morgan Stanley.
Diversification Opportunities for Northern Lights and Morgan Stanley
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Morgan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights 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 Northern Lights 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 Northern Lights 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 Northern Lights i.e., Northern Lights and Morgan Stanley go up and down completely randomly.
Pair Corralation between Northern Lights and Morgan Stanley
Given the investment horizon of 90 days Northern Lights is expected to generate 0.76 times more return on investment than Morgan Stanley. However, Northern Lights is 1.32 times less risky than Morgan Stanley. It trades about 0.07 of its potential returns per unit of risk. Morgan Stanley Pathway is currently generating about -0.06 per unit of risk. If you would invest 3,131 in Northern Lights on November 3, 2024 and sell it today you would earn a total of 450.50 from holding Northern Lights or generate 14.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 14.92% |
| Values | Daily Returns |
Northern Lights vs. Morgan Stanley Pathway
Performance |
| Timeline |
| Northern Lights |
| Morgan Stanley Pathway |
Northern Lights and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Morgan Stanley
The main advantage of trading using opposite Northern Lights and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights 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.| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Northern Lights | Northern Lights vs. First Trust Exchange Traded | Northern Lights vs. Northern Lights |
| Morgan Stanley vs. Matthews China Discovery | Morgan Stanley vs. Matthews Emerging Markets | Morgan Stanley vs. Neuberger Berman ETF | Morgan Stanley vs. Fidelity Small Mid Cap |
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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