Correlation Between Morgan Stanley and Vanguard Momentum

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

Diversification Opportunities for Morgan Stanley and Vanguard Momentum

0.97

Correlation Coefficient

Morgan Stanley  Vanguard Momentum

Almost no diversification

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

Pair Corralation between Morgan Stanley and Vanguard Momentum

Given the investment horizon of 90 days Morgan Stanley ETF is expected to generate 0.6 times more return on investment than Vanguard Momentum. However, Morgan Stanley ETF is 1.67 times less risky than Vanguard Momentum. It trades about -0.08 of its potential returns per unit of risk. Vanguard Momentum Factor is currently generating about -0.08 per unit of risk. If you would invest  5,929  in Morgan Stanley ETF on December 28, 2024 and sell it today you would lose (280.00) from holding Morgan Stanley ETF or give up 4.72% of portfolio value over 90 days.

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

Morgan Stanley ETF  vs.  Vanguard Momentum Factor

Morgan Stanley ETF

Risk-Adjusted Performance

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 primary indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Momentum Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Momentum Factor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Morgan Stanley and Vanguard Momentum

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

The idea behind Morgan Stanley ETF and Vanguard Momentum Factor 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 CEOs Directory module to screen CEOs from public companies around the world.