Correlation Between Morgan Stanley and IShares MSCI

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

By analyzing existing cross correlation between Morgan Stanley ETF and iShares MSCI Intl, you can compare the effects of market volatilities on Morgan Stanley and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and IShares MSCI.

Diversification Opportunities for Morgan Stanley and IShares MSCI

0.97

Correlation Coefficient

Morgan Stanley  IShares MSCI

Almost no diversification

The 3 months correlation between Morgan and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley ETF and iShares MSCI Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Intl 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 ETF are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Intl has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and IShares MSCI go up and down completely randomly.

Pair Corralation between Morgan Stanley and IShares MSCI

Given the investment horizon of 90 days Morgan Stanley ETF is expected to generate 0.65 times more return on investment than IShares MSCI. However, Morgan Stanley ETF is 1.55 times less risky than IShares MSCI. It trades about 0.23 of its potential returns per unit of risk. iShares MSCI Intl is currently generating about 0.12 per unit of risk. If you would invest  5,662  in Morgan Stanley ETF on September 13, 2024 and sell it today you would earn a total of  124.00  from holding Morgan Stanley ETF or generate 2.19% return on investment over 90 days.

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

Morgan Stanley ETF  vs.  iShares MSCI Intl

Morgan Stanley ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares MSCI Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Intl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Morgan Stanley and IShares MSCI

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

The idea behind Morgan Stanley ETF and iShares MSCI Intl 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.