Correlation Between Morgan Stanley and Realty Income

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

By analyzing existing cross correlation between Morgan Stanley Institutional and Realty Income, you can compare the effects of market volatilities on Morgan Stanley and Realty Income 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 Realty Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Realty Income.

Diversification Opportunities for Morgan Stanley and Realty Income

-0.39

Correlation Coefficient

Morgan Stanley  Realty Income

Very good diversification

The 3 months correlation between Morgan and Realty is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Institutional and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income 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 Institutional are associated (or correlated) with Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Realty Income go up and down completely randomly.

Pair Corralation between Morgan Stanley and Realty Income

Assuming the 90 days horizon Morgan Stanley Institutional is expected to generate 0.53 times more return on investment than Realty Income. However, Morgan Stanley Institutional is 1.87 times less risky than Realty Income. It trades about 0.01 of its potential returns per unit of risk. Realty Income is currently generating about -0.24 per unit of risk. If you would invest  1,006  in Morgan Stanley Institutional on September 30, 2024 and sell it today you would earn a total of  2.00  from holding Morgan Stanley Institutional or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.06%
Values	Daily Returns

Morgan Stanley Institutional  vs.  Realty Income

Morgan Stanley Insti

Risk-Adjusted Performance

0 of 100

Very Weak

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

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Morgan Stanley and Realty Income

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

The idea behind Morgan Stanley Institutional and Realty Income 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.