Correlation Between Large Cap and Morgan Stanley

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

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

Diversification Opportunities for Large Cap and Morgan Stanley

0.88

Correlation Coefficient

Large Cap  Morgan Stanley

Very poor diversification

The 3 months correlation between Large and Morgan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund and Morgan Stanley Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Multi and Large Cap 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 Large Cap Growth Profund 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 Multi has no effect on the direction of Large Cap i.e., Large Cap and Morgan Stanley go up and down completely randomly.

Pair Corralation between Large Cap and Morgan Stanley

Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 0.59 times more return on investment than Morgan Stanley. However, Large Cap Growth Profund is 1.7 times less risky than Morgan Stanley. It trades about 0.0 of its potential returns per unit of risk. Morgan Stanley Multi is currently generating about -0.1 per unit of risk. If you would invest  4,635  in Large Cap Growth Profund on October 9, 2024 and sell it today you would lose (2.00) from holding Large Cap Growth Profund or give up 0.04% of portfolio value over 90 days.

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

Large Cap Growth Profund  vs.  Morgan Stanley Multi

Large Cap Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Growth Profund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Morgan Stanley Multi

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Multi are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Large Cap and Morgan Stanley

The main advantage of trading using opposite Large Cap and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap Growth Profund and Morgan Stanley Multi 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.