Correlation Between Morgan Stanley and SCE Trust

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

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

Diversification Opportunities for Morgan Stanley and SCE Trust

0.79

Correlation Coefficient

Morgan Stanley  SCE Trust

Poor diversification

The 3 months correlation between Morgan and SCE is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and SCE Trust IV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCE Trust IV 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 SCE Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCE Trust IV has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and SCE Trust go up and down completely randomly.

Pair Corralation between Morgan Stanley and SCE Trust

Assuming the 90 days horizon Morgan Stanley is expected to generate 2.56 times less return on investment than SCE Trust. But when comparing it to its historical volatility, Morgan Stanley is 2.34 times less risky than SCE Trust. It trades about 0.14 of its potential returns per unit of risk. SCE Trust IV is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,363  in SCE Trust IV on August 31, 2024 and sell it today you would earn a total of  105.00  from holding SCE Trust IV or generate 4.44% return on investment over 90 days.

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

Morgan Stanley  vs.  SCE Trust IV

Morgan Stanley

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SCE Trust IV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCE Trust IV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical and fundamental indicators, SCE Trust is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Morgan Stanley and SCE Trust

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

The idea behind Morgan Stanley and SCE Trust IV 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.