Correlation Between Vanguard FTSE and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 Vanguard FTSE and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and Morgan Stanley ETF, you can compare the effects of market volatilities on Vanguard FTSE 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 Vanguard FTSE with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Morgan Stanley.
Diversification Opportunities for Vanguard FTSE and Morgan Stanley
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Morgan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and Vanguard FTSE 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 Vanguard FTSE Developed 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 ETF has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Morgan Stanley go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Morgan Stanley
Considering the 90-day investment horizon Vanguard FTSE Developed is expected to generate 18.7 times more return on investment than Morgan Stanley. However, Vanguard FTSE is 18.7 times more volatile than Morgan Stanley ETF. It trades about 0.1 of its potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.51 per unit of risk. If you would invest 4,897 in Vanguard FTSE Developed on November 27, 2024 and sell it today you would earn a total of 222.00 from holding Vanguard FTSE Developed or generate 4.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. Morgan Stanley ETF
Performance |
| Timeline |
| Vanguard FTSE Developed |
| Morgan Stanley ETF |
Vanguard FTSE and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Morgan Stanley
The main advantage of trading using opposite Vanguard FTSE and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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.| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Value Index | Vanguard FTSE vs. Vanguard Small Cap Value |
| Morgan Stanley vs. VanEck Vectors Moodys | Morgan Stanley vs. Valued Advisers Trust | Morgan Stanley vs. Xtrackers California Municipal | Morgan Stanley vs. Principal Exchange Traded Funds |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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