Correlation Between IShares Trust and Morgan Stanley

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

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

Diversification Opportunities for IShares Trust and Morgan Stanley

0.9

Correlation Coefficient

IShares Trust  Morgan Stanley

Almost no diversification

The 3 months correlation between IShares and Morgan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust 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 IShares Trust 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 iShares Trust 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 IShares Trust i.e., IShares Trust and Morgan Stanley go up and down completely randomly.

Pair Corralation between IShares Trust and Morgan Stanley

Given the investment horizon of 90 days IShares Trust is expected to generate 1.66 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, iShares Trust is 1.4 times less risky than Morgan Stanley. It trades about 0.13 of its potential returns per unit of risk. Morgan Stanley Etf is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,635  in Morgan Stanley Etf on September 12, 2024 and sell it today you would earn a total of  423.00  from holding Morgan Stanley Etf or generate 6.38% return on investment over 90 days.

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

iShares Trust  vs.  Morgan Stanley Etf

iShares Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Morgan Stanley Etf

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Etf are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Trust and Morgan Stanley

The main advantage of trading using opposite IShares Trust and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 iShares Trust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.