Correlation Between Global Core and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Global Core 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 Global Core and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Portfolio and Morgan Stanley Multi, you can compare the effects of market volatilities on Global Core 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 Global Core with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Core and Morgan Stanley.
Diversification Opportunities for Global Core and Morgan Stanley
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Morgan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and Morgan Stanley Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Multi and Global Core 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 Global E Portfolio 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 Multi has no effect on the direction of Global Core i.e., Global Core and Morgan Stanley go up and down completely randomly.
Pair Corralation between Global Core and Morgan Stanley
Assuming the 90 days horizon Global Core is expected to generate 9.87 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Global E Portfolio is 2.35 times less risky than Morgan Stanley. It trades about 0.13 of its potential returns per unit of risk. Morgan Stanley Multi is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 3,990 in Morgan Stanley Multi on August 29, 2024 and sell it today you would earn a total of 1,021 from holding Morgan Stanley Multi or generate 25.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Portfolio vs. Morgan Stanley Multi
Performance |
| Timeline |
| Global E Portfolio |
| Morgan Stanley Multi |
Global Core and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Core and Morgan Stanley
The main advantage of trading using opposite Global Core and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Core 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.| Global Core vs. Inverse Government Long | Global Core vs. Dreyfus Government Cash | Global Core vs. Lord Abbett Government | Global Core vs. Prudential Government Income |
| Morgan Stanley vs. Growth Portfolio Class | Morgan Stanley vs. Global Opportunity Portfolio | Morgan Stanley vs. Small Pany Growth | Morgan Stanley vs. Mid Cap Growth |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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