Correlation Between Morgan Stanley and Lord Abbett

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Lord Abbett 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 Lord Abbett 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 Lord Abbett Micro Cap, you can compare the effects of market volatilities on Morgan Stanley and Lord Abbett 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 Lord Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Lord Abbett.

Diversification Opportunities for Morgan Stanley and Lord Abbett

0.78

Correlation Coefficient

Morgan Stanley  Lord Abbett

Poor diversification

The 3 months correlation between Morgan and Lord is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Multi and Lord Abbett Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Micro 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 Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Micro has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Lord Abbett go up and down completely randomly.

Pair Corralation between Morgan Stanley and Lord Abbett

Assuming the 90 days horizon Morgan Stanley Multi is expected to generate 1.26 times more return on investment than Lord Abbett. However, Morgan Stanley is 1.26 times more volatile than Lord Abbett Micro Cap. It trades about -0.04 of its potential returns per unit of risk. Lord Abbett Micro Cap is currently generating about -0.16 per unit of risk. If you would invest  4,851  in Morgan Stanley Multi on December 28, 2024 and sell it today you would lose (328.00) from holding Morgan Stanley Multi or give up 6.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Morgan Stanley Multi  vs.  Lord Abbett Micro Cap

Morgan Stanley Multi

Risk-Adjusted Performance

Very Weak

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

Lord Abbett Micro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lord Abbett Micro Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Morgan Stanley and Lord Abbett

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

The idea behind Morgan Stanley Multi and Lord Abbett Micro Cap 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.