Correlation Between AG Mortgage and Morgan Stanley

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

By analyzing existing cross correlation between AG Mortgage Investment and Morgan Stanley Focus, you can compare the effects of market volatilities on AG Mortgage and Morgan Stanley 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 AG Mortgage with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of AG Mortgage and Morgan Stanley.

Diversification Opportunities for AG Mortgage and Morgan Stanley

0.65

Correlation Coefficient

AG Mortgage  Morgan Stanley

Poor diversification

The 3 months correlation between MITT-PC and Morgan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and Morgan Stanley Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Focus and AG Mortgage 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 AG Mortgage Investment are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Focus has no effect on the direction of AG Mortgage i.e., AG Mortgage and Morgan Stanley go up and down completely randomly.

Pair Corralation between AG Mortgage and Morgan Stanley

Assuming the 90 days trading horizon AG Mortgage Investment is expected to generate 0.82 times more return on investment than Morgan Stanley. However, AG Mortgage Investment is 1.22 times less risky than Morgan Stanley. It trades about 0.14 of its potential returns per unit of risk. Morgan Stanley Focus is currently generating about 0.05 per unit of risk. If you would invest  1,394  in AG Mortgage Investment on September 25, 2024 and sell it today you would earn a total of  1,101  from holding AG Mortgage Investment or generate 78.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.17%
Values	Daily Returns

AG Mortgage Investment  vs.  Morgan Stanley Focus

AG Mortgage Investment

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, AG Mortgage is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Morgan Stanley Focus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Focus 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AG Mortgage and Morgan Stanley

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

The idea behind AG Mortgage Investment and Morgan Stanley Focus 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.