Correlation Between Morgan Stanley and Invesco Municipal

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

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

Diversification Opportunities for Morgan Stanley and Invesco Municipal

0.35

Correlation Coefficient

Morgan Stanley  Invesco Municipal

Weak diversification

The 3 months correlation between Morgan and Invesco is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Invesco Municipal Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Trust 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 Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Trust has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Invesco Municipal go up and down completely randomly.

Pair Corralation between Morgan Stanley and Invesco Municipal

Allowing for the 90-day total investment horizon Morgan Stanley is expected to under-perform the Invesco Municipal. In addition to that, Morgan Stanley is 3.28 times more volatile than Invesco Municipal Trust. It trades about -0.03 of its total potential returns per unit of risk. Invesco Municipal Trust is currently generating about 0.03 per unit of volatility. If you would invest  942.00  in Invesco Municipal Trust on December 27, 2024 and sell it today you would earn a total of  11.00  from holding Invesco Municipal Trust or generate 1.17% return on investment over 90 days.

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

Morgan Stanley  vs.  Invesco Municipal Trust

Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Municipal Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Municipal Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Invesco Municipal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Morgan Stanley and Invesco Municipal

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

The idea behind Morgan Stanley and Invesco Municipal Trust 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..