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
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Emerging and Morgan is 0.72. 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 Equity is expected to under-perform the Morgan Stanley. But the mutual fund apears to be less risky and, when comparing its historical volatility, Emerging Markets Equity is 1.03 times less risky than Morgan Stanley. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Morgan Stanley European is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 2,242 in Morgan Stanley European on August 31, 2024 and sell it today you would lose (96.00) from holding Morgan Stanley European or give up 4.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| 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. Pear Tree Polaris | Emerging Markets vs. Artisan High Income | Emerging Markets vs. HUMANA INC | Emerging Markets vs. Aquagold International |
| Morgan Stanley vs. Gabelli Convertible And | Morgan Stanley vs. Advent Claymore Convertible | Morgan Stanley vs. Rationalpier 88 Convertible | Morgan Stanley vs. Lord Abbett Convertible |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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