Correlation Between Strategic Alternatives and Morgan Stanley

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

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

Diversification Opportunities for Strategic Alternatives and Morgan Stanley

0.82

Correlation Coefficient

Strategic Alternatives  Morgan Stanley

Very poor diversification

The 3 months correlation between Strategic and Morgan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Alternatives Fund and Morgan Stanley Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Global and Strategic Alternatives 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 Strategic Alternatives 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 Global has no effect on the direction of Strategic Alternatives i.e., Strategic Alternatives and Morgan Stanley go up and down completely randomly.

Pair Corralation between Strategic Alternatives and Morgan Stanley

Assuming the 90 days horizon Strategic Alternatives Fund is expected to generate 0.21 times more return on investment than Morgan Stanley. However, Strategic Alternatives Fund is 4.77 times less risky than Morgan Stanley. It trades about -0.22 of its potential returns per unit of risk. Morgan Stanley Global is currently generating about -0.24 per unit of risk. If you would invest  938.00  in Strategic Alternatives Fund on October 9, 2024 and sell it today you would lose (33.00) from holding Strategic Alternatives Fund or give up 3.52% of portfolio value over 90 days.

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

Strategic Alternatives Fund  vs.  Morgan Stanley Global

Strategic Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Alternatives Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Strategic Alternatives and Morgan Stanley

The main advantage of trading using opposite Strategic Alternatives and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Alternatives 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 Strategic Alternatives Fund and Morgan Stanley Global 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.