Correlation Between Jpmorgan Mortgage-backed and Morgan Stanley

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

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

Diversification Opportunities for Jpmorgan Mortgage-backed and Morgan Stanley

0.64

Correlation Coefficient

Jpmorgan Mortgage-backed  Morgan Stanley

Poor diversification

The 3 months correlation between Jpmorgan and Morgan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Jpmorgan Mortgage Backed Secur and Morgan Stanley Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Global and Jpmorgan Mortgage-backed 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 Jpmorgan Mortgage Backed Securities 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 Global has no effect on the direction of Jpmorgan Mortgage-backed i.e., Jpmorgan Mortgage-backed and Morgan Stanley go up and down completely randomly.

Pair Corralation between Jpmorgan Mortgage-backed and Morgan Stanley

Assuming the 90 days horizon Jpmorgan Mortgage-backed is expected to generate 1.32 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Jpmorgan Mortgage Backed Securities is 3.19 times less risky than Morgan Stanley. It trades about 0.02 of its potential returns per unit of risk. Morgan Stanley Global is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,125  in Morgan Stanley Global on October 10, 2024 and sell it today you would earn a total of  21.00  from holding Morgan Stanley Global or generate 1.87% return on investment over 90 days.

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

Jpmorgan Mortgage Backed Secur  vs.  Morgan Stanley Global

Jpmorgan Mortgage-backed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jpmorgan Mortgage Backed Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Jpmorgan Mortgage-backed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Morgan Stanley Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Global 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.

Pair Trading with Jpmorgan Mortgage-backed and Morgan Stanley

The main advantage of trading using opposite Jpmorgan Mortgage-backed and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jpmorgan Mortgage-backed 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 Jpmorgan Mortgage Backed Securities and Morgan Stanley Global 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.