Correlation Between Europac Gold and Morgan Stanley

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

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

Diversification Opportunities for Europac Gold and Morgan Stanley

0.46

Correlation Coefficient

Europac Gold  Morgan Stanley

Very weak diversification

The 3 months correlation between Europac and Morgan is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Europac Gold Fund and Morgan Stanley Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Government and Europac Gold 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 Europac Gold Fund 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 Government has no effect on the direction of Europac Gold i.e., Europac Gold and Morgan Stanley go up and down completely randomly.

Pair Corralation between Europac Gold and Morgan Stanley

Assuming the 90 days horizon Europac Gold Fund is expected to generate 2.81 times more return on investment than Morgan Stanley. However, Europac Gold is 2.81 times more volatile than Morgan Stanley Government. It trades about -0.15 of its potential returns per unit of risk. Morgan Stanley Government is currently generating about -0.56 per unit of risk. If you would invest  1,011  in Europac Gold Fund on October 8, 2024 and sell it today you would lose (59.00) from holding Europac Gold Fund or give up 5.84% of portfolio value over 90 days.

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

Europac Gold Fund  vs.  Morgan Stanley Government

Europac Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europac Gold Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Morgan Stanley Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Government has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Europac Gold and Morgan Stanley

The main advantage of trading using opposite Europac Gold and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europac Gold 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 Europac Gold Fund and Morgan Stanley Government 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.