Correlation Between Ashmore Group and Morgan Stanley

Can any of the company-specific risk be diversified away by investing in both Ashmore Group 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 Ashmore Group and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ashmore Group Plc and Morgan Stanley China, you can compare the effects of market volatilities on Ashmore Group 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 Ashmore Group with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashmore Group and Morgan Stanley.

Diversification Opportunities for Ashmore Group and Morgan Stanley

-0.38

Correlation Coefficient

Ashmore Group  Morgan Stanley

Very good diversification

The 3 months correlation between Ashmore and Morgan is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ashmore Group Plc and Morgan Stanley China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley China and Ashmore Group 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 Ashmore Group Plc 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 China has no effect on the direction of Ashmore Group i.e., Ashmore Group and Morgan Stanley go up and down completely randomly.

Pair Corralation between Ashmore Group and Morgan Stanley

Assuming the 90 days horizon Ashmore Group Plc is expected to under-perform the Morgan Stanley. In addition to that, Ashmore Group is 1.0 times more volatile than Morgan Stanley China. It trades about -0.16 of its total potential returns per unit of risk. Morgan Stanley China is currently generating about 0.08 per unit of volatility. If you would invest  1,249  in Morgan Stanley China on December 29, 2024 and sell it today you would earn a total of  58.00  from holding Morgan Stanley China or generate 4.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Ashmore Group Plc  vs.  Morgan Stanley China

Ashmore Group Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ashmore Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Morgan Stanley China

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley China are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ashmore Group and Morgan Stanley

The main advantage of trading using opposite Ashmore Group and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashmore Group 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.

The idea behind Ashmore Group Plc and Morgan Stanley China pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.