Correlation Between MFS Investment and Morgan Stanley

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

By analyzing existing cross correlation between MFS Investment Grade and Morgan Stanley Emerging, you can compare the effects of market volatilities on MFS Investment and Morgan Stanley 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 MFS Investment with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Investment and Morgan Stanley.

Diversification Opportunities for MFS Investment and Morgan Stanley

0.41

Correlation Coefficient

MFS Investment  Morgan Stanley

Very weak diversification

The 3 months correlation between MFS and Morgan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Morgan Stanley Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Emerging and MFS Investment 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 MFS Investment Grade are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Emerging has no effect on the direction of MFS Investment i.e., MFS Investment and Morgan Stanley go up and down completely randomly.

Pair Corralation between MFS Investment and Morgan Stanley

Considering the 90-day investment horizon MFS Investment Grade is expected to under-perform the Morgan Stanley. But the stock apears to be less risky and, when comparing its historical volatility, MFS Investment Grade is 1.46 times less risky than Morgan Stanley. The stock trades about -0.23 of its potential returns per unit of risk. The Morgan Stanley Emerging is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  455.00  in Morgan Stanley Emerging on October 9, 2024 and sell it today you would lose (4.00) from holding Morgan Stanley Emerging or give up 0.88% of portfolio value over 90 days.

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

MFS Investment Grade  vs.  Morgan Stanley Emerging

MFS Investment Grade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Investment Grade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Morgan Stanley Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MFS Investment and Morgan Stanley

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

The idea behind MFS Investment Grade and Morgan Stanley Emerging 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.