Correlation Between Morgan Stanley and Allient

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

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

Diversification Opportunities for Morgan Stanley and Allient

0.82

Correlation Coefficient

Morgan Stanley  Allient

Very poor diversification

The 3 months correlation between Morgan and Allient is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient 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 Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Allient go up and down completely randomly.

Pair Corralation between Morgan Stanley and Allient

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 0.68 times more return on investment than Allient. However, Morgan Stanley is 1.48 times less risky than Allient. It trades about -0.08 of its potential returns per unit of risk. Allient is currently generating about -0.18 per unit of risk. If you would invest  12,740  in Morgan Stanley on October 14, 2024 and sell it today you would lose (395.00) from holding Morgan Stanley or give up 3.1% of portfolio value over 90 days.

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

Morgan Stanley  vs.  Allient

Morgan Stanley

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 6 (%) 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 February 2025.

Allient

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Allient

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

The idea behind Morgan Stanley and Allient 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.