Correlation Between Western Asset and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and Morgan Stanley Institutional, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Morgan Stanley.
Diversification Opportunities for Western Asset and Morgan Stanley
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Morgan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Western Asset 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 Western Asset High 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 Insti has no effect on the direction of Western Asset i.e., Western Asset and Morgan Stanley go up and down completely randomly.
Pair Corralation between Western Asset and Morgan Stanley
Assuming the 90 days horizon Western Asset is expected to generate 1.7 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Western Asset High is 3.49 times less risky than Morgan Stanley. It trades about 0.14 of its potential returns per unit of risk. Morgan Stanley Institutional is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 798.00 in Morgan Stanley Institutional on September 2, 2024 and sell it today you would earn a total of 211.00 from holding Morgan Stanley Institutional or generate 26.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.92% |
| Values | Daily Returns |
Western Asset High vs. Morgan Stanley Institutional
Performance |
| Timeline |
| Western Asset High |
| Morgan Stanley Insti |
Western Asset and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Morgan Stanley
The main advantage of trading using opposite Western Asset and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. T Rowe Price | Western Asset vs. T Rowe Price | Western Asset vs. Strategic Allocation Aggressive | Western Asset vs. Aqr Large Cap |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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