Correlation Between Morgan Stanley and Mentor Capital

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

By analyzing existing cross correlation between Morgan Stanley and Mentor Capital, you can compare the effects of market volatilities on Morgan Stanley and Mentor Capital 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 Mentor Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Mentor Capital.

Diversification Opportunities for Morgan Stanley and Mentor Capital

-0.6

Correlation Coefficient

Morgan Stanley  Mentor Capital

Excellent diversification

The 3 months correlation between Morgan and Mentor is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Mentor Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentor Capital 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 are associated (or correlated) with Mentor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentor Capital has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Mentor Capital go up and down completely randomly.

Pair Corralation between Morgan Stanley and Mentor Capital

Assuming the 90 days horizon Morgan Stanley is expected to generate 2.26 times less return on investment than Mentor Capital. But when comparing it to its historical volatility, Morgan Stanley is 18.77 times less risky than Mentor Capital. It trades about 0.03 of its potential returns per unit of risk. Mentor Capital is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Mentor Capital on December 2, 2024 and sell it today you would lose (1.00) from holding Mentor Capital or give up 16.67% of portfolio value over 90 days.

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

Morgan Stanley  vs.  Mentor Capital

Morgan Stanley

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Mentor Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mentor Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Mentor Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Morgan Stanley and Mentor Capital

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

The idea behind Morgan Stanley and Mentor Capital 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.