Correlation Between Morgan Stanley and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Compass Diversified 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 Morgan Stanley and Compass Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and Compass Diversified Holdings, you can compare the effects of market volatilities on Morgan Stanley and Compass Diversified 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 Morgan Stanley with a short position of Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Compass Diversified.
Diversification Opportunities for Morgan Stanley and Compass Diversified
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Morgan and Compass is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and Morgan Stanley 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 Morgan Stanley are associated (or correlated) with Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Compass Diversified go up and down completely randomly.
Pair Corralation between Morgan Stanley and Compass Diversified
Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.24 times more return on investment than Compass Diversified. However, Morgan Stanley is 1.24 times more volatile than Compass Diversified Holdings. It trades about 0.22 of its potential returns per unit of risk. Compass Diversified Holdings is currently generating about 0.26 per unit of risk. If you would invest 11,820 in Morgan Stanley on August 28, 2024 and sell it today you would earn a total of 1,546 from holding Morgan Stanley or generate 13.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley vs. Compass Diversified Holdings
Performance |
| Timeline |
| Morgan Stanley |
| Compass Diversified |
Morgan Stanley and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Compass Diversified
The main advantage of trading using opposite Morgan Stanley and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified's long position.| Morgan Stanley vs. Goldman Sachs Group | Morgan Stanley vs. Riot Blockchain | Morgan Stanley vs. Marathon Digital Holdings | Morgan Stanley vs. Applied Blockchain |
| Compass Diversified vs. Matthews International | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Valmont Industries | Compass Diversified vs. Brookfield Business Partners |
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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