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 Global 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

0.52

Correlation Coefficient

Morgan Stanley  Franklin Mutual

Very weak diversification

The 3 months correlation between Morgan and Franklin is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Global 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 Global 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

Assuming the 90 days horizon Morgan Stanley is expected to generate 1.96 times less return on investment than Franklin Mutual. In addition to that, Morgan Stanley is 1.62 times more volatile than Franklin Mutual Global. It trades about 0.07 of its total potential returns per unit of risk. Franklin Mutual Global is currently generating about 0.22 per unit of volatility. If you would invest  2,861  in Franklin Mutual Global on December 30, 2024 and sell it today you would earn a total of  262.00  from holding Franklin Mutual Global or generate 9.16% return on investment over 90 days.

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

Morgan Stanley Global  vs.  Franklin Mutual Global

Morgan Stanley Global

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Global are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Global are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Franklin Mutual may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Global 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.