Correlation Between Morgan Stanley and Select Fund

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

By analyzing existing cross correlation between Morgan Stanley Multi and Select Fund Investor, you can compare the effects of market volatilities on Morgan Stanley and Select Fund 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Select Fund.

Diversification Opportunities for Morgan Stanley and Select Fund

0.88

Correlation Coefficient

Morgan Stanley  Select Fund

Very poor diversification

The 3 months correlation between Morgan and Select is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Multi and Select Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund Investor 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 Multi are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund Investor has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Select Fund go up and down completely randomly.

Pair Corralation between Morgan Stanley and Select Fund

Assuming the 90 days horizon Morgan Stanley Multi is expected to generate 1.76 times more return on investment than Select Fund. However, Morgan Stanley is 1.76 times more volatile than Select Fund Investor. It trades about 0.11 of its potential returns per unit of risk. Select Fund Investor is currently generating about 0.11 per unit of risk. If you would invest  1,678  in Morgan Stanley Multi on September 15, 2024 and sell it today you would earn a total of  2,412  from holding Morgan Stanley Multi or generate 143.74% return on investment over 90 days.

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

Morgan Stanley Multi  vs.  Select Fund Investor

Morgan Stanley Multi

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Multi are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Select Fund Investor

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund Investor are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Select Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Select Fund

The main advantage of trading using opposite Morgan Stanley and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund's long position.

The idea behind Morgan Stanley Multi and Select Fund Investor 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.