Correlation Between Morgan Stanley and Vanguard Small-cap

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

Diversification Opportunities for Morgan Stanley and Vanguard Small-cap

0.25

Correlation Coefficient

Morgan Stanley  Vanguard Small-cap

Modest diversification

The 3 months correlation between Morgan and Vanguard is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Global and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap 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 Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Morgan Stanley and Vanguard Small-cap

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

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.35%
Values	Daily Returns

Morgan Stanley Global  vs.  Vanguard Small Cap Index

Morgan Stanley Global

Risk-Adjusted Performance

OK

Over the last 90 days Morgan Stanley Global 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.

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index 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 Vanguard Small-cap

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

The idea behind Morgan Stanley Global and Vanguard Small Cap Index 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.