Correlation Between Real Assets and Morgan Stanley

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

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

Diversification Opportunities for Real Assets and Morgan Stanley

0.73

Correlation Coefficient

Real Assets  Morgan Stanley

Poor diversification

The 3 months correlation between Real and Morgan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Real Assets Portfolio and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Real Assets 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 Real Assets Portfolio 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 Insti has no effect on the direction of Real Assets i.e., Real Assets and Morgan Stanley go up and down completely randomly.

Pair Corralation between Real Assets and Morgan Stanley

Assuming the 90 days horizon Real Assets Portfolio is expected to under-perform the Morgan Stanley. But the mutual fund apears to be less risky and, when comparing its historical volatility, Real Assets Portfolio is 1.46 times less risky than Morgan Stanley. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Morgan Stanley Institutional is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  726.00  in Morgan Stanley Institutional on September 20, 2024 and sell it today you would earn a total of  87.00  from holding Morgan Stanley Institutional or generate 11.98% return on investment over 90 days.

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

Real Assets Portfolio  vs.  Morgan Stanley Institutional

Real Assets Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Assets Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

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 latest weak performance, the Fund's forward-looking signals 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 Real Assets and Morgan Stanley

The main advantage of trading using opposite Real Assets and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Assets 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 Real Assets Portfolio and Morgan Stanley Institutional 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.