Correlation Between Morgan Stanley and Senmiao Technology

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

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

Diversification Opportunities for Morgan Stanley and Senmiao Technology

-0.3

Correlation Coefficient

Morgan Stanley  Senmiao Technology

Very good diversification

The 3 months correlation between Morgan and Senmiao is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology 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 Senmiao Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senmiao Technology has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Senmiao Technology go up and down completely randomly.

Pair Corralation between Morgan Stanley and Senmiao Technology

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.53 times less return on investment than Senmiao Technology. But when comparing it to its historical volatility, Morgan Stanley is 3.52 times less risky than Senmiao Technology. It trades about 0.06 of its potential returns per unit of risk. Senmiao Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Senmiao Technology on November 19, 2024 and sell it today you would lose (3.00) from holding Senmiao Technology or give up 3.3% of portfolio value over 90 days.

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

Morgan Stanley  vs.  Senmiao Technology

Morgan Stanley

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Senmiao Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Senmiao Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Morgan Stanley and Senmiao Technology

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

The idea behind Morgan Stanley and Senmiao Technology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.