Correlation Between Morgan Stanley and SEP Acquisition

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and SEP Acquisition 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 SEP Acquisition 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 SEP Acquisition Corp, you can compare the effects of market volatilities on Morgan Stanley and SEP Acquisition 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 SEP Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and SEP Acquisition.

Diversification Opportunities for Morgan Stanley and SEP Acquisition

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Morgan and SEP is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and SEP Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEP Acquisition Corp 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 SEP Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEP Acquisition Corp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and SEP Acquisition go up and down completely randomly.

Pair Corralation between Morgan Stanley and SEP Acquisition

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.45 times less return on investment than SEP Acquisition. But when comparing it to its historical volatility, Morgan Stanley Direct is 3.54 times less risky than SEP Acquisition. It trades about 0.04 of its potential returns per unit of risk. SEP Acquisition Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,060  in SEP Acquisition Corp on September 14, 2024 and sell it today you would lose (28.00) from holding SEP Acquisition Corp or give up 2.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy73.89%
ValuesDaily Returns

Morgan Stanley Direct  vs.  SEP Acquisition Corp

 Performance 
       Timeline  
Morgan Stanley Direct 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.
SEP Acquisition Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SEP Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SEP Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Morgan Stanley and SEP Acquisition Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Morgan Stanley and SEP Acquisition

The main advantage of trading using opposite Morgan Stanley and SEP Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, SEP Acquisition 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 SEP Acquisition will offset losses from the drop in SEP Acquisition's long position.
The idea behind Morgan Stanley Direct and SEP Acquisition Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

Other Complementary Tools

My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Earnings Calls
Check upcoming earnings announcements updated hourly across public exchanges
Portfolio Dashboard
Portfolio dashboard that provides centralized access to all your investments
Latest Portfolios
Quick portfolio dashboard that showcases your latest portfolios
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account