Correlation Between Morgan Stanley and Capital World
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Capital World 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 Morgan Stanley and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley Emerging and Capital World Bond, you can compare the effects of market volatilities on Morgan Stanley and Capital World 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 Morgan Stanley with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Capital World.
Diversification Opportunities for Morgan Stanley and Capital World
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Morgan and Capital is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Emerging and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Morgan Stanley 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 Morgan Stanley Emerging are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Capital World go up and down completely randomly.
Pair Corralation between Morgan Stanley and Capital World
Assuming the 90 days horizon Morgan Stanley is expected to generate 3.67 times less return on investment than Capital World. In addition to that, Morgan Stanley is 1.24 times more volatile than Capital World Bond. It trades about 0.0 of its total potential returns per unit of risk. Capital World Bond is currently generating about 0.02 per unit of volatility. If you would invest 1,567 in Capital World Bond on September 3, 2024 and sell it today you would earn a total of 45.00 from holding Capital World Bond or generate 2.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley Emerging vs. Capital World Bond
Performance |
| Timeline |
| Morgan Stanley Emerging |
| Capital World Bond |
Morgan Stanley and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Capital World
The main advantage of trading using opposite Morgan Stanley and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Morgan Stanley vs. Vanguard Total Stock | Morgan Stanley vs. Vanguard 500 Index | Morgan Stanley vs. Vanguard Total Stock | Morgan Stanley vs. Vanguard Total Stock |
| Capital World vs. Rbc Emerging Markets | Capital World vs. Transamerica Emerging Markets | Capital World vs. Templeton Developing Markets | Capital World vs. Morgan Stanley Emerging |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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