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 Institutional, 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
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Emerging and Morgan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Equity and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti 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 Insti 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 6.24 times less return on investment than Morgan Stanley. In addition to that, Emerging Markets is 1.19 times more volatile than Morgan Stanley Institutional. It trades about 0.02 of its total potential returns per unit of risk. Morgan Stanley Institutional is currently generating about 0.13 per unit of volatility. If you would invest 1,665 in Morgan Stanley Institutional on December 13, 2024 and sell it today you would earn a total of 43.00 from holding Morgan Stanley Institutional or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerging Markets Equity vs. Morgan Stanley Institutional
Performance |
| Timeline |
| Emerging Markets Equity |
| Morgan Stanley Insti |
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. Litman Gregory Masters | ||
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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