Correlation Between Morgan Stanley and Ashmore Group

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

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

Diversification Opportunities for Morgan Stanley and Ashmore Group

0.66

Correlation Coefficient

Morgan Stanley  Ashmore Group

Poor diversification

The 3 months correlation between Morgan and Ashmore is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley India and Ashmore Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore Group Plc and Morgan Stanley 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 Morgan Stanley India are associated (or correlated) with Ashmore Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Group Plc has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Ashmore Group go up and down completely randomly.

Pair Corralation between Morgan Stanley and Ashmore Group

Considering the 90-day investment horizon Morgan Stanley India is expected to generate 1.02 times more return on investment than Ashmore Group. However, Morgan Stanley is 1.02 times more volatile than Ashmore Group Plc. It trades about -0.04 of its potential returns per unit of risk. Ashmore Group Plc is currently generating about -0.17 per unit of risk. If you would invest  2,525  in Morgan Stanley India on December 28, 2024 and sell it today you would lose (71.00) from holding Morgan Stanley India or give up 2.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Morgan Stanley India  vs.  Ashmore Group Plc

Morgan Stanley India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley India has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable forward indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ashmore Group Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ashmore Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Morgan Stanley and Ashmore Group

The main advantage of trading using opposite Morgan Stanley and Ashmore Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Ashmore Group 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 Ashmore Group will offset losses from the drop in Ashmore Group's long position.

The idea behind Morgan Stanley India and Ashmore Group Plc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.