Correlation Between Nasdaq-100(r) and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) and Morgan Stanley 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 Nasdaq-100(r) and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Morgan Stanley China, you can compare the effects of market volatilities on Nasdaq-100(r) and Morgan Stanley 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 Nasdaq-100(r) with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Morgan Stanley.
Diversification Opportunities for Nasdaq-100(r) and Morgan Stanley
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nasdaq-100(r) and Morgan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Morgan Stanley China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley China and Nasdaq-100(r) 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 Nasdaq 100 2x Strategy are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley China has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Morgan Stanley go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Morgan Stanley
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 3.58 times more return on investment than Morgan Stanley. However, Nasdaq-100(r) is 3.58 times more volatile than Morgan Stanley China. It trades about 0.08 of its potential returns per unit of risk. Morgan Stanley China is currently generating about 0.09 per unit of risk. If you would invest 38,566 in Nasdaq 100 2x Strategy on November 3, 2024 and sell it today you would earn a total of 1,507 from holding Nasdaq 100 2x Strategy or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Morgan Stanley China
Performance |
| Timeline |
| Nasdaq 100 2x |
| Morgan Stanley China |
Nasdaq-100(r) and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Morgan Stanley
The main advantage of trading using opposite Nasdaq-100(r) and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) position performs unexpectedly, Morgan Stanley 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 Morgan Stanley will offset losses from the drop in Morgan Stanley's long position.| Nasdaq-100(r) vs. Rationalpier 88 Convertible | Nasdaq-100(r) vs. Gabelli Convertible And | Nasdaq-100(r) vs. Virtus Convertible | Nasdaq-100(r) vs. Absolute Convertible Arbitrage |
| Morgan Stanley vs. Vanguard Total Stock | Morgan Stanley vs. Vanguard 500 Index | Morgan Stanley vs. Vanguard Total Stock | Morgan Stanley vs. Vanguard Total Stock |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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