Correlation Between Morgan Stanley and Tianjin Capital
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Tianjin Capital 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 Tianjin Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and Tianjin Capital Environmental, you can compare the effects of market volatilities on Morgan Stanley and Tianjin Capital 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 Tianjin Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Tianjin Capital.
Diversification Opportunities for Morgan Stanley and Tianjin Capital
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morgan and Tianjin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi 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 Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Tianjin Capital go up and down completely randomly.
Pair Corralation between Morgan Stanley and Tianjin Capital
Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.8 times more return on investment than Tianjin Capital. However, Morgan Stanley is 1.8 times more volatile than Tianjin Capital Environmental. It trades about 0.12 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about 0.09 per unit of risk. If you would invest 9,527 in Morgan Stanley on September 24, 2024 and sell it today you would earn a total of 2,817 from holding Morgan Stanley or generate 29.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 99.21% |
Values | Daily Returns |
Morgan Stanley vs. Tianjin Capital Environmental
Performance |
Timeline |
Morgan Stanley |
Tianjin Capital Envi |
Morgan Stanley and Tianjin Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Morgan Stanley and Tianjin Capital
The main advantage of trading using opposite Morgan Stanley and Tianjin Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Tianjin Capital 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 Tianjin Capital will offset losses from the drop in Tianjin Capital's long position.Morgan Stanley vs. Visa Class A | Morgan Stanley vs. Diamond Hill Investment | Morgan Stanley vs. Distoken Acquisition | Morgan Stanley vs. AllianceBernstein Holding LP |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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