Correlation Between Western Asset and Morgan Stanley

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

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

Diversification Opportunities for Western Asset and Morgan Stanley

-0.26

Correlation Coefficient

Western Asset  Morgan Stanley

Very good diversification

The 3 months correlation between Western and Morgan is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Managed and Morgan Stanley India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley India and Western Asset 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 Western Asset Managed 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 India has no effect on the direction of Western Asset i.e., Western Asset and Morgan Stanley go up and down completely randomly.

Pair Corralation between Western Asset and Morgan Stanley

Considering the 90-day investment horizon Western Asset Managed is expected to generate 0.52 times more return on investment than Morgan Stanley. However, Western Asset Managed is 1.93 times less risky than Morgan Stanley. It trades about 0.11 of its potential returns per unit of risk. Morgan Stanley India is currently generating about -0.24 per unit of risk. If you would invest  1,030  in Western Asset Managed on December 3, 2024 and sell it today you would earn a total of  22.00  from holding Western Asset Managed or generate 2.14% return on investment over 90 days.

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

Western Asset Managed  vs.  Morgan Stanley India

Western Asset Managed

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Managed are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable primary indicators, Western Asset is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Morgan Stanley India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley India has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the mutual fund stockholders.

Pair Trading with Western Asset and Morgan Stanley

The main advantage of trading using opposite Western Asset and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Managed and Morgan Stanley India 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.