Correlation Between Morgan Stanley and International Opportunity

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

Diversification Opportunities for Morgan Stanley and International Opportunity

0.54

Correlation Coefficient

Morgan Stanley  International Opportunity

Very weak diversification

The 3 months correlation between Morgan and International is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Multi and International Opportunity Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Opportunity 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 International Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Opportunity has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and International Opportunity go up and down completely randomly.

Pair Corralation between Morgan Stanley and International Opportunity

Assuming the 90 days horizon Morgan Stanley Multi is expected to generate 2.92 times more return on investment than International Opportunity. However, Morgan Stanley is 2.92 times more volatile than International Opportunity Portfolio. It trades about 0.45 of its potential returns per unit of risk. International Opportunity Portfolio is currently generating about 0.26 per unit of risk. If you would invest  4,562  in Morgan Stanley Multi on September 19, 2024 and sell it today you would earn a total of  686.00  from holding Morgan Stanley Multi or generate 15.04% return on investment over 90 days.

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

Morgan Stanley Multi  vs.  International Opportunity Port

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 fundamental indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

International Opportunity

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in International Opportunity Portfolio are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, International Opportunity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and International Opportunity

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

The idea behind Morgan Stanley Multi and International Opportunity 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.