Correlation Between Franklin Liberty and Morgan Stanley

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

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

Diversification Opportunities for Franklin Liberty and Morgan Stanley

0.96

Correlation Coefficient

Franklin Liberty  Morgan Stanley

Almost no diversification

The 3 months correlation between Franklin and Morgan is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Senior and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and Franklin Liberty 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 Franklin Liberty Senior 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 ETF has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Morgan Stanley go up and down completely randomly.

Pair Corralation between Franklin Liberty and Morgan Stanley

Given the investment horizon of 90 days Franklin Liberty Senior is expected to generate 1.03 times more return on investment than Morgan Stanley. However, Franklin Liberty is 1.03 times more volatile than Morgan Stanley ETF. It trades about -0.16 of its potential returns per unit of risk. Morgan Stanley ETF is currently generating about -0.26 per unit of risk. If you would invest  2,428  in Franklin Liberty Senior on December 4, 2024 and sell it today you would lose (11.00) from holding Franklin Liberty Senior or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Franklin Liberty Senior  vs.  Morgan Stanley ETF

Franklin Liberty Senior

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Senior are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Franklin Liberty is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Morgan Stanley ETF

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Franklin Liberty and Morgan Stanley

The main advantage of trading using opposite Franklin Liberty and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty 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 Franklin Liberty Senior and Morgan Stanley ETF 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.

Check out your portfolio center.

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.