Correlation Between Morgan Stanley and Elmos Semiconductor

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

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

Diversification Opportunities for Morgan Stanley and Elmos Semiconductor

0.2

Correlation Coefficient

Morgan Stanley  Elmos Semiconductor

Modest diversification

The 3 months correlation between Morgan and Elmos is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor 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 Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between Morgan Stanley and Elmos Semiconductor

Assuming the 90 days trading horizon Morgan Stanley is expected to generate 0.6 times more return on investment than Elmos Semiconductor. However, Morgan Stanley is 1.68 times less risky than Elmos Semiconductor. It trades about 0.06 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about 0.03 per unit of risk. If you would invest  8,027  in Morgan Stanley on October 11, 2024 and sell it today you would earn a total of  4,399  from holding Morgan Stanley or generate 54.8% return on investment over 90 days.

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

Morgan Stanley  vs.  Elmos Semiconductor SE

Morgan Stanley

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Elmos Semiconductor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Elmos Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Elmos Semiconductor

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

The idea behind Morgan Stanley and Elmos Semiconductor SE 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.