Correlation Between Morgan Stanley and Causeway International

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

Diversification Opportunities for Morgan Stanley and Causeway International

0.81

Correlation Coefficient

Morgan Stanley  Causeway International

Very poor diversification

The 3 months correlation between Morgan and Causeway is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Institutional and Causeway International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway International 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 Causeway International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway International has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Causeway International go up and down completely randomly.

Pair Corralation between Morgan Stanley and Causeway International

Assuming the 90 days horizon Morgan Stanley is expected to generate 1.52 times less return on investment than Causeway International. In addition to that, Morgan Stanley is 1.11 times more volatile than Causeway International Value. It trades about 0.04 of its total potential returns per unit of risk. Causeway International Value is currently generating about 0.06 per unit of volatility. If you would invest  1,567  in Causeway International Value on September 19, 2024 and sell it today you would earn a total of  428.00  from holding Causeway International Value or generate 27.31% return on investment over 90 days.

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

Morgan Stanley Institutional  vs.  Causeway International Value

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

Causeway International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Causeway International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Morgan Stanley and Causeway International

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

The idea behind Morgan Stanley Institutional and Causeway International Value 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 CEOs Directory module to screen CEOs from public companies around the world.