Correlation Between Short Duration and Morgan Stanley

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

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

Diversification Opportunities for Short Duration and Morgan Stanley

-0.36

Correlation Coefficient

Short Duration  Morgan Stanley

Very good diversification

The 3 months correlation between Short and Morgan is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and Morgan Stanley Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Multi and Short Duration 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 Short Duration Inflation 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 Multi has no effect on the direction of Short Duration i.e., Short Duration and Morgan Stanley go up and down completely randomly.

Pair Corralation between Short Duration and Morgan Stanley

Assuming the 90 days horizon Short Duration is expected to generate 15.46 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Short Duration Inflation is 8.13 times less risky than Morgan Stanley. It trades about 0.05 of its potential returns per unit of risk. Morgan Stanley Multi is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  646.00  in Morgan Stanley Multi on September 26, 2024 and sell it today you would earn a total of  862.00  from holding Morgan Stanley Multi or generate 133.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Short Duration Inflation  vs.  Morgan Stanley Multi

Short Duration Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Duration Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Morgan Stanley Multi

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Multi are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Short Duration and Morgan Stanley

The main advantage of trading using opposite Short Duration and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration 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 Short Duration Inflation and Morgan Stanley Multi 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.