Correlation Between Morgan Stanley and Apollo Investment

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

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

Diversification Opportunities for Morgan Stanley and Apollo Investment

-0.05

Correlation Coefficient

Morgan Stanley  Apollo Investment

Good diversification

The 3 months correlation between Morgan and Apollo is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Apollo Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Investment Corp 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 are associated (or correlated) with Apollo Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Investment Corp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Apollo Investment go up and down completely randomly.

Pair Corralation between Morgan Stanley and Apollo Investment

Assuming the 90 days horizon Morgan Stanley is expected to generate 101.82 times more return on investment than Apollo Investment. However, Morgan Stanley is 101.82 times more volatile than Apollo Investment Corp. It trades about 0.11 of its potential returns per unit of risk. Apollo Investment Corp is currently generating about -0.03 per unit of risk. If you would invest  12,070  in Morgan Stanley on December 29, 2024 and sell it today you would lose (996.00) from holding Morgan Stanley or give up 8.25% of portfolio value over 90 days.

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

Morgan Stanley  vs.  Apollo Investment Corp

Morgan Stanley

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Morgan Stanley reported solid returns over the last few months and may actually be approaching a breakup point.

Apollo Investment Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Morgan Stanley and Apollo Investment

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

The idea behind Morgan Stanley and Apollo Investment Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.