Correlation Between Emerging Markets and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Emerging Markets 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 Emerging Markets and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerging Markets Equity and Morgan Stanley European, you can compare the effects of market volatilities on Emerging Markets 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 Emerging Markets with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Markets and Morgan Stanley.
Diversification Opportunities for Emerging Markets and Morgan Stanley
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerging and Morgan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Equity and Morgan Stanley European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley European and Emerging Markets 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 Emerging Markets Equity 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 European has no effect on the direction of Emerging Markets i.e., Emerging Markets and Morgan Stanley go up and down completely randomly.
Pair Corralation between Emerging Markets and Morgan Stanley
Assuming the 90 days horizon Emerging Markets is expected to generate 1.12 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Emerging Markets Equity is 1.15 times less risky than Morgan Stanley. It trades about 0.03 of its potential returns per unit of risk. Morgan Stanley European is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,114 in Morgan Stanley European on September 12, 2024 and sell it today you would earn a total of 182.00 from holding Morgan Stanley European or generate 8.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Equity vs. Morgan Stanley European
Performance |
| Timeline |
| Emerging Markets Equity |
| Morgan Stanley European |
Emerging Markets and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerging Markets and Morgan Stanley
The main advantage of trading using opposite Emerging Markets and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerging Markets 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.| Emerging Markets vs. Technology Ultrasector Profund | Emerging Markets vs. Science Technology Fund | Emerging Markets vs. Global Technology Portfolio | Emerging Markets vs. Blackrock Science Technology |
| Morgan Stanley vs. Invesco Asia Pacific | Morgan Stanley vs. Invesco European Small | Morgan Stanley vs. Invesco Developing Markets | Morgan Stanley vs. Aquagold International |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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