Correlation Between High Yield and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both High Yield 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 High Yield and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Fund and Morgan Stanley Global, you can compare the effects of market volatilities on High Yield 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 High Yield with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Morgan Stanley.
Diversification Opportunities for High Yield and Morgan Stanley
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between High and Morgan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund and Morgan Stanley Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Global and High Yield 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 High Yield Fund 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 Global has no effect on the direction of High Yield i.e., High Yield and Morgan Stanley go up and down completely randomly.
Pair Corralation between High Yield and Morgan Stanley
Assuming the 90 days horizon High Yield is expected to generate 3.48 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, High Yield Fund is 5.28 times less risky than Morgan Stanley. It trades about 0.12 of its potential returns per unit of risk. Morgan Stanley Global is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 963.00 in Morgan Stanley Global on August 30, 2024 and sell it today you would earn a total of 762.00 from holding Morgan Stanley Global or generate 79.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Fund vs. Morgan Stanley Global
Performance |
| Timeline |
| High Yield Fund |
| Morgan Stanley Global |
High Yield and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Morgan Stanley
The main advantage of trading using opposite High Yield and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield 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.| High Yield vs. Dreyfus Natural Resources | High Yield vs. Gamco Natural Resources | High Yield vs. World Energy Fund | High Yield vs. Guinness Atkinson Alternative |
| Morgan Stanley vs. Firsthand Alternative Energy | Morgan Stanley vs. Portfolio 21 Global | Morgan Stanley vs. HUMANA INC | 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |