Correlation Between Ford and Morgan Stanley

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Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Morgan Stanley Multi, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Morgan Stanley.

Diversification Opportunities for Ford and Morgan Stanley

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Ford and Morgan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Morgan Stanley go up and down completely randomly.

Pair Corralation between Ford and Morgan Stanley

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Morgan Stanley. In addition to that, Ford is 1.17 times more volatile than Morgan Stanley Multi. It trades about -0.31 of its total potential returns per unit of risk. Morgan Stanley Multi is currently generating about 0.43 per unit of volatility. If you would invest  1,399  in Morgan Stanley Multi on September 19, 2024 and sell it today you would earn a total of  202.00  from holding Morgan Stanley Multi or generate 14.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Ford Motor  vs.  Morgan Stanley Multi

 Performance 
       Timeline  
Ford Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
Morgan Stanley Multi 

Risk-Adjusted Performance

27 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Multi are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Ford and Morgan Stanley Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Morgan Stanley

The main advantage of trading using opposite Ford and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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