Correlation Between Morgan Stanley and Oaktree Acquisition

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

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

Diversification Opportunities for Morgan Stanley and Oaktree Acquisition

-0.17

Correlation Coefficient

Morgan Stanley  Oaktree Acquisition

Good diversification

The 3 months correlation between Morgan and Oaktree is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Oaktree Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Acquisition Corp 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 Oaktree Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Acquisition Corp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Oaktree Acquisition go up and down completely randomly.

Pair Corralation between Morgan Stanley and Oaktree Acquisition

Allowing for the 90-day total investment horizon Morgan Stanley is expected to under-perform the Oaktree Acquisition. In addition to that, Morgan Stanley is 5.35 times more volatile than Oaktree Acquisition Corp. It trades about -0.15 of its total potential returns per unit of risk. Oaktree Acquisition Corp is currently generating about -0.05 per unit of volatility. If you would invest  1,012  in Oaktree Acquisition Corp on September 26, 2024 and sell it today you would lose (3.00) from holding Oaktree Acquisition Corp or give up 0.3% 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.  Oaktree Acquisition Corp

Morgan Stanley

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Oaktree Acquisition Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oaktree Acquisition Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Oaktree Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Morgan Stanley and Oaktree Acquisition

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

The idea behind Morgan Stanley and Oaktree Acquisition Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.