Correlation Between Driehaus Micro and Morgan Stanley

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

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

Diversification Opportunities for Driehaus Micro and Morgan Stanley

0.94

Correlation Coefficient

Driehaus Micro  Morgan Stanley

Almost no diversification

The 3 months correlation between Driehaus and Morgan is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Driehaus Micro Cap and Morgan Stanley Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Multi and Driehaus Micro 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 Driehaus Micro Cap 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 Multi has no effect on the direction of Driehaus Micro i.e., Driehaus Micro and Morgan Stanley go up and down completely randomly.

Pair Corralation between Driehaus Micro and Morgan Stanley

Assuming the 90 days horizon Driehaus Micro is expected to generate 1.93 times less return on investment than Morgan Stanley. In addition to that, Driehaus Micro is 1.01 times more volatile than Morgan Stanley Multi. It trades about 0.21 of its total potential returns per unit of risk. Morgan Stanley Multi is currently generating about 0.41 per unit of volatility. If you would invest  3,392  in Morgan Stanley Multi on September 4, 2024 and sell it today you would earn a total of  1,621  from holding Morgan Stanley Multi or generate 47.79% return on investment over 90 days.

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

Driehaus Micro Cap  vs.  Morgan Stanley Multi

Driehaus Micro Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Driehaus Micro Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Driehaus Micro showed solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley Multi

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Multi are ranked lower than 31 (%) 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.

Pair Trading with Driehaus Micro and Morgan Stanley

The main advantage of trading using opposite Driehaus Micro and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driehaus Micro 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 Driehaus Micro Cap and Morgan Stanley Multi 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.