Correlation Between Kaiser Aluminum and Morgan Stanley

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

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

Diversification Opportunities for Kaiser Aluminum and Morgan Stanley

0.49

Correlation Coefficient

Kaiser Aluminum  Morgan Stanley

Very weak diversification

The 3 months correlation between Kaiser and Morgan is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Morgan Stanley Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Direct and Kaiser Aluminum 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 Kaiser Aluminum 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 Direct has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Morgan Stanley go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Morgan Stanley

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 1.94 times less return on investment than Morgan Stanley. In addition to that, Kaiser Aluminum is 1.63 times more volatile than Morgan Stanley Direct. It trades about 0.01 of its total potential returns per unit of risk. Morgan Stanley Direct is currently generating about 0.03 per unit of volatility. If you would invest  1,907  in Morgan Stanley Direct on September 26, 2024 and sell it today you would earn a total of  194.00  from holding Morgan Stanley Direct or generate 10.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	46.98%
Values	Daily Returns

Kaiser Aluminum  vs.  Morgan Stanley Direct

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kaiser Aluminum and Morgan Stanley

The main advantage of trading using opposite Kaiser Aluminum and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum and Morgan Stanley Direct 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.