Correlation Between Morgan Stanley and Baird Short

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

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

Diversification Opportunities for Morgan Stanley and Baird Short

0.21

Correlation Coefficient

Morgan Stanley  Baird Short

Modest diversification

The 3 months correlation between Morgan and Baird is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Institutional and Baird Short Term Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Short Term 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 Institutional are associated (or correlated) with Baird Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Short Term has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Baird Short go up and down completely randomly.

Pair Corralation between Morgan Stanley and Baird Short

Assuming the 90 days horizon Morgan Stanley is expected to generate 1.33 times less return on investment than Baird Short. In addition to that, Morgan Stanley is 9.4 times more volatile than Baird Short Term Municipal. It trades about 0.01 of its total potential returns per unit of risk. Baird Short Term Municipal is currently generating about 0.11 per unit of volatility. If you would invest  944.00  in Baird Short Term Municipal on October 23, 2024 and sell it today you would earn a total of  52.00  from holding Baird Short Term Municipal or generate 5.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Morgan Stanley Institutional  vs.  Baird Short Term Municipal

Morgan Stanley Insti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Baird Short Term

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Short Term Municipal are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baird Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Baird Short

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

The idea behind Morgan Stanley Institutional and Baird Short Term Municipal 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.