Correlation Between Icon Financial and Morgan Stanley

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

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

Diversification Opportunities for Icon Financial and Morgan Stanley

-0.59

Correlation Coefficient

Icon Financial  Morgan Stanley

Excellent diversification

The 3 months correlation between Icon and Morgan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Icon Financial Fund and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Icon Financial 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 Icon Financial 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 Insti has no effect on the direction of Icon Financial i.e., Icon Financial and Morgan Stanley go up and down completely randomly.

Pair Corralation between Icon Financial and Morgan Stanley

Assuming the 90 days horizon Icon Financial is expected to generate 1.17 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Icon Financial Fund is 1.95 times less risky than Morgan Stanley. It trades about 0.02 of its potential returns per unit of risk. Morgan Stanley Institutional is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,808  in Morgan Stanley Institutional on October 25, 2024 and sell it today you would earn a total of  4.00  from holding Morgan Stanley Institutional or generate 0.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Icon Financial Fund  vs.  Morgan Stanley Institutional

Icon Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Financial 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 Insti

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Institutional are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Icon Financial and Morgan Stanley

The main advantage of trading using opposite Icon Financial and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Icon Financial 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 Icon Financial Fund and Morgan Stanley Institutional 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.