Correlation Between Real Assets and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Real Assets 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 Real Assets and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Assets Portfolio and Morgan Stanley European, you can compare the effects of market volatilities on Real Assets 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 Real Assets with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Assets and Morgan Stanley.
Diversification Opportunities for Real Assets and Morgan Stanley
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Real and Morgan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Real Assets Portfolio and Morgan Stanley European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley European and Real Assets 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 Real Assets 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 European has no effect on the direction of Real Assets i.e., Real Assets and Morgan Stanley go up and down completely randomly.
Pair Corralation between Real Assets and Morgan Stanley
Assuming the 90 days horizon Real Assets Portfolio is expected to generate 0.4 times more return on investment than Morgan Stanley. However, Real Assets Portfolio is 2.51 times less risky than Morgan Stanley. It trades about 0.3 of its potential returns per unit of risk. Morgan Stanley European is currently generating about 0.06 per unit of risk. If you would invest 1,010 in Real Assets Portfolio on November 29, 2024 and sell it today you would earn a total of 29.00 from holding Real Assets Portfolio or generate 2.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Assets Portfolio vs. Morgan Stanley European
Performance |
| Timeline |
| Real Assets Portfolio |
| Morgan Stanley European |
Real Assets and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Assets and Morgan Stanley
The main advantage of trading using opposite Real Assets and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Assets 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.| Real Assets vs. Boston Partners Small | Real Assets vs. Inverse Mid Cap Strategy | Real Assets vs. T Rowe Price | Real Assets vs. Ab Discovery Value |
| Morgan Stanley vs. Emerging Markets Equity | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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