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 Vitality, 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
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Emerging and Morgan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Markets Equity and Morgan Stanley Vitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Vitality 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 Vitality 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 generate 0.84 times more return on investment than Morgan Stanley. However, Emerging Markets Equity is 1.2 times less risky than Morgan Stanley. It trades about 0.04 of its potential returns per unit of risk. Morgan Stanley Vitality is currently generating about -0.01 per unit of risk. If you would invest 1,268 in Emerging Markets Equity on September 14, 2024 and sell it today you would earn a total of 113.00 from holding Emerging Markets Equity or generate 8.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Emerging Markets Equity vs. Morgan Stanley Vitality
Performance |
| Timeline |
| Emerging Markets Equity |
| Morgan Stanley Vitality |
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. Oaktree Diversifiedome | Emerging Markets vs. Small Cap Stock | Emerging Markets vs. Huber Capital Diversified | Emerging Markets vs. Pimco Diversified Income |
| Morgan Stanley vs. Emerging Markets Equity | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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