Correlation Between Federated Premier and Morgan Stanley

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

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

Diversification Opportunities for Federated Premier and Morgan Stanley

-0.53

Correlation Coefficient

Federated Premier  Morgan Stanley

Excellent diversification

The 3 months correlation between Federated and Morgan is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and Morgan Stanley Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Direct and Federated Premier 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 Federated Premier Municipal 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 Direct has no effect on the direction of Federated Premier i.e., Federated Premier and Morgan Stanley go up and down completely randomly.

Pair Corralation between Federated Premier and Morgan Stanley

Considering the 90-day investment horizon Federated Premier is expected to generate 2.56 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Federated Premier Municipal is 2.5 times less risky than Morgan Stanley. It trades about 0.03 of its potential returns per unit of risk. Morgan Stanley Direct is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,862  in Morgan Stanley Direct on October 4, 2024 and sell it today you would earn a total of  204.00  from holding Morgan Stanley Direct or generate 10.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	48.19%
Values	Daily Returns

Federated Premier Municipal  vs.  Morgan Stanley Direct

Federated Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Federated Premier and Morgan Stanley

The main advantage of trading using opposite Federated Premier and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Premier 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 Federated Premier Municipal and Morgan Stanley Direct 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 Stocks Directory module to find actively traded stocks across global markets.