Correlation Between Large Cap and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Large Cap 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 Large Cap and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Cap Equity and Morgan Stanley Vitality, you can compare the effects of market volatilities on Large Cap 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 Large Cap with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Morgan Stanley.
Diversification Opportunities for Large Cap and Morgan Stanley
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Large and Morgan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap 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 Large Cap 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 Large Cap 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 Large Cap i.e., Large Cap and Morgan Stanley go up and down completely randomly.
Pair Corralation between Large Cap and Morgan Stanley
Assuming the 90 days horizon Large Cap Equity is expected to generate 0.69 times more return on investment than Morgan Stanley. However, Large Cap Equity is 1.45 times less risky than Morgan Stanley. It trades about 0.11 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 2,189 in Large Cap Equity on September 14, 2024 and sell it today you would earn a total of 488.00 from holding Large Cap Equity or generate 22.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Large Cap Equity vs. Morgan Stanley Vitality
Performance |
| Timeline |
| Large Cap Equity |
| Morgan Stanley Vitality |
Large Cap and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Morgan Stanley
The main advantage of trading using opposite Large Cap and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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.| Large Cap vs. Goldman Sachs Small | Large Cap vs. Victory Rs Partners | Large Cap vs. Boston Partners Small | Large Cap vs. John Hancock Ii |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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