Correlation Between Morgan Stanley and American Funds
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley Direct and American Funds Global, you can compare the effects of market volatilities on Morgan Stanley and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and American Funds.
Diversification Opportunities for Morgan Stanley and American Funds
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Morgan and American is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and American Funds Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global 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 Direct are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Global has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and American Funds go up and down completely randomly.
Pair Corralation between Morgan Stanley and American Funds
Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.51 times less return on investment than American Funds. In addition to that, Morgan Stanley is 2.09 times more volatile than American Funds Global. It trades about 0.04 of its total potential returns per unit of risk. American Funds Global is currently generating about 0.12 per unit of volatility. If you would invest 1,925 in American Funds Global on September 15, 2024 and sell it today you would earn a total of 510.00 from holding American Funds Global or generate 26.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.01% |
| Values | Daily Returns |
Morgan Stanley Direct vs. American Funds Global
Performance |
| Timeline |
| Morgan Stanley Direct |
| American Funds Global |
Morgan Stanley and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and American Funds
The main advantage of trading using opposite Morgan Stanley and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Morgan Stanley vs. Lipocine | Morgan Stanley vs. Digi International | Morgan Stanley vs. Evertz Technologies Limited | Morgan Stanley vs. Videolocity International |
| American Funds vs. Prudential Short Duration | American Funds vs. Easterly Snow Longshort | American Funds vs. Alpine Ultra Short | American Funds vs. Boston Partners Longshort |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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