Correlation Between Morgan Stanley and American Funds
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and American Funds 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 American Funds 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 American Funds 2040, you can compare the effects of market volatilities on Morgan Stanley and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and American Funds.
Diversification Opportunities for Morgan Stanley and American Funds
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Morgan and American is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Emerging and American Funds 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2040 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2040 has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and American Funds go up and down completely randomly.
Pair Corralation between Morgan Stanley and American Funds
Assuming the 90 days horizon Morgan Stanley Emerging is expected to under-perform the American Funds. But the mutual fund apears to be less risky and, when comparing its historical volatility, Morgan Stanley Emerging is 1.39 times less risky than American Funds. The mutual fund trades about -0.03 of its potential returns per unit of risk. The American Funds 2040 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,642 in American Funds 2040 on September 3, 2024 and sell it today you would earn a total of 514.00 from holding American Funds 2040 or generate 31.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley Emerging vs. American Funds 2040
Performance |
| Timeline |
| Morgan Stanley Emerging |
| American Funds 2040 |
Morgan Stanley and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and American Funds
The main advantage of trading using opposite Morgan Stanley and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' 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 |
| American Funds vs. Western Assets Emerging | American Funds vs. Morgan Stanley Emerging | American Funds vs. Oklahoma College Savings | American Funds vs. Templeton Developing Markets |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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