Correlation Between Vanguard and Morgan Stanley

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

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

Diversification Opportunities for Vanguard and Morgan Stanley

0.98

Correlation Coefficient

Vanguard  Morgan Stanley

Almost no diversification

The 3 months correlation between Vanguard and Morgan is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Mid Cap 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 Vanguard 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 Vanguard SP Mid Cap 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 Vanguard i.e., Vanguard and Morgan Stanley go up and down completely randomly.

Pair Corralation between Vanguard and Morgan Stanley

Given the investment horizon of 90 days Vanguard SP Mid Cap is expected to under-perform the Morgan Stanley. In addition to that, Vanguard is 1.14 times more volatile than Morgan Stanley ETF. It trades about -0.09 of its total potential returns per unit of risk. Morgan Stanley ETF is currently generating about -0.08 per unit of volatility. If you would invest  5,929  in Morgan Stanley ETF on December 29, 2024 and sell it today you would lose (280.00) from holding Morgan Stanley ETF or give up 4.72% of portfolio value over 90 days.

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

Vanguard SP Mid Cap  vs.  Morgan Stanley ETF

Vanguard SP Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Morgan Stanley ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard and Morgan Stanley

The main advantage of trading using opposite Vanguard and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard SP Mid Cap 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.