Correlation Between United Utilities and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 United Utilities and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and Morgan Stanley Direct, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Morgan Stanley.
Diversification Opportunities for United Utilities and Morgan Stanley
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Morgan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Morgan Stanley Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Direct and United Utilities 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 United Utilities Group 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 Direct has no effect on the direction of United Utilities i.e., United Utilities and Morgan Stanley go up and down completely randomly.
Pair Corralation between United Utilities and Morgan Stanley
Assuming the 90 days horizon United Utilities Group is expected to generate 1.01 times more return on investment than Morgan Stanley. However, United Utilities is 1.01 times more volatile than Morgan Stanley Direct. It trades about 0.05 of its potential returns per unit of risk. Morgan Stanley Direct is currently generating about 0.04 per unit of risk. If you would invest 1,218 in United Utilities Group on October 29, 2024 and sell it today you would earn a total of 176.00 from holding United Utilities Group or generate 14.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 74.09% |
| Values | Daily Returns |
United Utilities Group vs. Morgan Stanley Direct
Performance |
| Timeline |
| United Utilities |
| Morgan Stanley Direct |
United Utilities and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Morgan Stanley
The main advantage of trading using opposite United Utilities and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.| United Utilities vs. Artesian Resources | United Utilities vs. Global Water Resources | United Utilities vs. Essential Utilities | United Utilities vs. American Water Works |
| Morgan Stanley vs. Nicola Mining | Morgan Stanley vs. NioCorp Developments Ltd | Morgan Stanley vs. Digi International | Morgan Stanley vs. Mako Mining Corp |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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