Correlation Between Morgan Stanley and RENN Fund

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

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

Diversification Opportunities for Morgan Stanley and RENN Fund

0.84

Correlation Coefficient

Morgan Stanley  RENN Fund

Very poor diversification

The 3 months correlation between Morgan and RENN is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and RENN Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENN Fund 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 RENN Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENN Fund has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and RENN Fund go up and down completely randomly.

Pair Corralation between Morgan Stanley and RENN Fund

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.04 times less return on investment than RENN Fund. But when comparing it to its historical volatility, Morgan Stanley is 1.55 times less risky than RENN Fund. It trades about 0.23 of its potential returns per unit of risk. RENN Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  194.00  in RENN Fund on September 12, 2024 and sell it today you would earn a total of  61.00  from holding RENN Fund or generate 31.44% return on investment over 90 days.

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

Morgan Stanley  vs.  RENN Fund

Morgan Stanley

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

RENN Fund

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RENN Fund are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, RENN Fund reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and RENN Fund

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

The idea behind Morgan Stanley and RENN Fund 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.