Correlation Between Dimensional Core and Morgan Stanley

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

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

Diversification Opportunities for Dimensional Core and Morgan Stanley

0.97

Correlation Coefficient

Dimensional Core  Morgan Stanley

Almost no diversification

The 3 months correlation between Dimensional and Morgan is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Core Equity and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and Dimensional Core 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 Dimensional Core Equity 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 ETF has no effect on the direction of Dimensional Core i.e., Dimensional Core and Morgan Stanley go up and down completely randomly.

Pair Corralation between Dimensional Core and Morgan Stanley

Given the investment horizon of 90 days Dimensional Core Equity is expected to generate 1.05 times more return on investment than Morgan Stanley. However, Dimensional Core is 1.05 times more volatile than Morgan Stanley ETF. It trades about 0.18 of its potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.17 per unit of risk. If you would invest  3,337  in Dimensional Core Equity on September 13, 2024 and sell it today you would earn a total of  289.00  from holding Dimensional Core Equity or generate 8.66% return on investment over 90 days.

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

Dimensional Core Equity  vs.  Morgan Stanley ETF

Dimensional Core Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Core Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Dimensional Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Morgan Stanley ETF

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley ETF are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dimensional Core and Morgan Stanley

The main advantage of trading using opposite Dimensional Core and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Core 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 Dimensional Core Equity and Morgan Stanley ETF 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.