Correlation Between Morgan Stanley and Healthcare Realty

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Healthcare Realty 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 Healthcare Realty 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 Healthcare Realty Trust, you can compare the effects of market volatilities on Morgan Stanley and Healthcare Realty 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 Healthcare Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Healthcare Realty.

Diversification Opportunities for Morgan Stanley and Healthcare Realty

0.12

Correlation Coefficient

Morgan Stanley  Healthcare Realty

Average diversification

The 3 months correlation between Morgan and Healthcare is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Institutional and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust 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 Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Healthcare Realty go up and down completely randomly.

Pair Corralation between Morgan Stanley and Healthcare Realty

Assuming the 90 days horizon Morgan Stanley Institutional is expected to generate 0.36 times more return on investment than Healthcare Realty. However, Morgan Stanley Institutional is 2.81 times less risky than Healthcare Realty. It trades about 0.02 of its potential returns per unit of risk. Healthcare Realty Trust is currently generating about -0.05 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  3.00  from holding Morgan Stanley Institutional or generate 0.3% return on investment over 90 days.

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

Morgan Stanley Institutional  vs.  Healthcare Realty Trust

Morgan Stanley Insti

Risk-Adjusted Performance

0 of 100

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 indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Healthcare Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Healthcare Realty is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Morgan Stanley and Healthcare Realty

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

The idea behind Morgan Stanley Institutional and Healthcare Realty Trust 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.