Correlation Between Morgan Stanley and Templeton Emerging

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

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

Diversification Opportunities for Morgan Stanley and Templeton Emerging

0.81

Correlation Coefficient

Morgan Stanley  Templeton Emerging

Very poor diversification

The 3 months correlation between Morgan and Templeton is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Emerging and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging 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 Emerging are associated (or correlated) with Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Templeton Emerging go up and down completely randomly.

Pair Corralation between Morgan Stanley and Templeton Emerging

Considering the 90-day investment horizon Morgan Stanley is expected to generate 1.03 times less return on investment than Templeton Emerging. But when comparing it to its historical volatility, Morgan Stanley Emerging is 1.24 times less risky than Templeton Emerging. It trades about 0.06 of its potential returns per unit of risk. Templeton Emerging Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,002  in Templeton Emerging Markets on December 4, 2024 and sell it today you would earn a total of  270.00  from holding Templeton Emerging Markets or generate 26.95% return on investment over 90 days.

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

Morgan Stanley Emerging  vs.  Templeton Emerging Markets

Morgan Stanley Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Emerging are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. 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.

Templeton Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable primary indicators, Templeton Emerging is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Morgan Stanley and Templeton Emerging

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

The idea behind Morgan Stanley Emerging and Templeton Emerging Markets 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.