Correlation Between Causeway International and Morgan Stanley

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

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

Diversification Opportunities for Causeway International and Morgan Stanley

0.81

Correlation Coefficient

Causeway International  Morgan Stanley

Very poor diversification

The 3 months correlation between Causeway and Morgan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Causeway International Value 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 Causeway International 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 Causeway International Value 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 Causeway International i.e., Causeway International and Morgan Stanley go up and down completely randomly.

Pair Corralation between Causeway International and Morgan Stanley

Assuming the 90 days horizon Causeway International Value is expected to generate 0.58 times more return on investment than Morgan Stanley. However, Causeway International Value is 1.72 times less risky than Morgan Stanley. It trades about 0.05 of its potential returns per unit of risk. Morgan Stanley Institutional is currently generating about -0.17 per unit of risk. If you would invest  2,036  in Causeway International Value on September 19, 2024 and sell it today you would earn a total of  11.00  from holding Causeway International Value or generate 0.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Causeway International Value  vs.  Morgan Stanley Institutional

Causeway International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Morgan Stanley Insti

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Causeway International and Morgan Stanley

The main advantage of trading using opposite Causeway International and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Causeway International 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 Causeway International Value and Morgan Stanley Institutional 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.