Correlation Between Morgan Stanley and FIRST TRUST
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and FIRST TRUST 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 FIRST TRUST 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 FIRST TRUST INDXX, you can compare the effects of market volatilities on Morgan Stanley and FIRST TRUST 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 FIRST TRUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and FIRST TRUST.
Diversification Opportunities for Morgan Stanley and FIRST TRUST
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Morgan and FIRST is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and FIRST TRUST INDXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST TRUST INDXX 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 FIRST TRUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST TRUST INDXX has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and FIRST TRUST go up and down completely randomly.
Pair Corralation between Morgan Stanley and FIRST TRUST
Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the FIRST TRUST. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 1.06 times less risky than FIRST TRUST. The stock trades about -0.04 of its potential returns per unit of risk. The FIRST TRUST INDXX is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,050 in FIRST TRUST INDXX on December 11, 2024 and sell it today you would earn a total of 76.00 from holding FIRST TRUST INDXX or generate 2.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Morgan Stanley Direct vs. FIRST TRUST INDXX
Performance |
| Timeline |
| Morgan Stanley Direct |
| FIRST TRUST INDXX |
Morgan Stanley and FIRST TRUST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and FIRST TRUST
The main advantage of trading using opposite Morgan Stanley and FIRST TRUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, FIRST TRUST 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 FIRST TRUST will offset losses from the drop in FIRST TRUST's long position.| Morgan Stanley vs. IDP Education Limited | Morgan Stanley vs. Daily Journal Corp | Morgan Stanley vs. Hochschild Mining PLC | Morgan Stanley vs. Meta Platforms |
| FIRST TRUST vs. FIRST TRUST GLOBAL | FIRST TRUST vs. FIRST TRUST GLOBAL | FIRST TRUST vs. FIRST TRUST GLOBAL | FIRST TRUST vs. FIRST TRUST GLOBAL |
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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