Correlation Between JAPAN AIRLINES and Morgan Stanley

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

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

Diversification Opportunities for JAPAN AIRLINES and Morgan Stanley

-0.14

Correlation Coefficient

JAPAN AIRLINES  Morgan Stanley

Good diversification

The 3 months correlation between JAPAN and Morgan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and JAPAN AIRLINES 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 JAPAN AIRLINES 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 has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and Morgan Stanley go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Morgan Stanley

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 0.57 times more return on investment than Morgan Stanley. However, JAPAN AIRLINES is 1.75 times less risky than Morgan Stanley. It trades about 0.1 of its potential returns per unit of risk. Morgan Stanley is currently generating about -0.04 per unit of risk. If you would invest  1,520  in JAPAN AIRLINES on December 21, 2024 and sell it today you would earn a total of  110.00  from holding JAPAN AIRLINES or generate 7.24% return on investment over 90 days.

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

JAPAN AIRLINES  vs.  Morgan Stanley

JAPAN AIRLINES

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, JAPAN AIRLINES may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JAPAN AIRLINES and Morgan Stanley

The main advantage of trading using opposite JAPAN AIRLINES and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES 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 JAPAN AIRLINES and Morgan Stanley 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.