Correlation Between Morgan Stanley and Global X
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley ETF and Global X Dow, you can compare the effects of market volatilities on Morgan Stanley and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Global X.
Diversification Opportunities for Morgan Stanley and Global X
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Morgan and Global is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley ETF and Global X Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Dow 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 ETF are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Dow has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Global X go up and down completely randomly.
Pair Corralation between Morgan Stanley and Global X
Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.14 times less return on investment than Global X. But when comparing it to its historical volatility, Morgan Stanley ETF is 1.08 times less risky than Global X. It trades about 0.28 of its potential returns per unit of risk. Global X Dow is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,254 in Global X Dow on August 26, 2024 and sell it today you would earn a total of 98.00 from holding Global X Dow or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley ETF vs. Global X Dow
Performance |
| Timeline |
| Morgan Stanley ETF |
| Global X Dow |
Morgan Stanley and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Global X
The main advantage of trading using opposite Morgan Stanley and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.The idea behind Morgan Stanley ETF and Global X Dow 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.| Global X vs. Global X SP | Global X vs. Global X Russell | Global X vs. Global X SP | Global X vs. Global X Nasdaq |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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