Correlation Between Morgan Stanley and Franklin Mutual

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

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

Diversification Opportunities for Morgan Stanley and Franklin Mutual

-0.14

Correlation Coefficient

Morgan Stanley  Franklin Mutual

Good diversification

The 3 months correlation between Morgan and Franklin is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Focus and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global and Morgan Stanley 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 Morgan Stanley Focus are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Global has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Franklin Mutual go up and down completely randomly.

Pair Corralation between Morgan Stanley and Franklin Mutual

If you would invest  1,008  in Morgan Stanley Focus on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Morgan Stanley Focus or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	19.05%
Values	Daily Returns

Morgan Stanley Focus  vs.  Franklin Mutual Global

Morgan Stanley Focus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Mutual Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Morgan Stanley and Franklin Mutual

The main advantage of trading using opposite Morgan Stanley and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Franklin Mutual 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 Franklin Mutual will offset losses from the drop in Franklin Mutual's long position.

The idea behind Morgan Stanley Focus and Franklin Mutual 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.