Correlation Between Extended Market and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Morgan Stanley China, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Morgan Stanley.
Diversification Opportunities for Extended Market and Morgan Stanley
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Extended and Morgan is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Morgan Stanley China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley China and Extended Market 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 Extended Market Index 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 China has no effect on the direction of Extended Market i.e., Extended Market and Morgan Stanley go up and down completely randomly.
Pair Corralation between Extended Market and Morgan Stanley
Assuming the 90 days horizon Extended Market Index is expected to generate 1.24 times more return on investment than Morgan Stanley. However, Extended Market is 1.24 times more volatile than Morgan Stanley China. It trades about 0.19 of its potential returns per unit of risk. Morgan Stanley China is currently generating about 0.08 per unit of risk. If you would invest 2,050 in Extended Market Index on November 3, 2024 and sell it today you would earn a total of 71.00 from holding Extended Market Index or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Morgan Stanley China
Performance |
| Timeline |
| Extended Market Index |
| Morgan Stanley China |
Extended Market and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Morgan Stanley
The main advantage of trading using opposite Extended Market and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Franklin Low Duration | Extended Market vs. Mndvux | Extended Market vs. Voya Global Equity | Extended Market vs. Legg Mason Bw |
| Morgan Stanley vs. Issachar Fund Class | Morgan Stanley vs. Davenport Small Cap | Morgan Stanley vs. Lord Abbett Diversified | Morgan Stanley vs. Global Diversified 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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