Correlation Between Morgan Stanley and Global Core

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

Diversification Opportunities for Morgan Stanley and Global Core

0.86

Correlation Coefficient

Morgan Stanley  Global Core

Very poor diversification

The 3 months correlation between Morgan and Global is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Multi and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio 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 Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Global Core go up and down completely randomly.

Pair Corralation between Morgan Stanley and Global Core

Assuming the 90 days horizon Morgan Stanley Multi is expected to generate 2.06 times more return on investment than Global Core. However, Morgan Stanley is 2.06 times more volatile than Global E Portfolio. It trades about 0.4 of its potential returns per unit of risk. Global E Portfolio is currently generating about 0.16 per unit of risk. If you would invest  3,385  in Morgan Stanley Multi on August 31, 2024 and sell it today you would earn a total of  1,588  from holding Morgan Stanley Multi or generate 46.91% 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.  Global E Portfolio

Morgan Stanley Multi

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Multi are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Global E Portfolio

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Portfolio are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Global Core may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Morgan Stanley and Global Core

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

The idea behind Morgan Stanley Multi and Global E Portfolio 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.