Correlation Between Morgan Stanley and Pimco Dynamic

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

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

Diversification Opportunities for Morgan Stanley and Pimco Dynamic

0.93

Correlation Coefficient

Morgan Stanley  Pimco Dynamic

Almost no diversification

The 3 months correlation between Morgan and Pimco is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Emerging and Pimco Dynamic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Dynamic Income 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 Emerging are associated (or correlated) with Pimco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Dynamic Income has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Pimco Dynamic go up and down completely randomly.

Pair Corralation between Morgan Stanley and Pimco Dynamic

Considering the 90-day investment horizon Morgan Stanley Emerging is expected to generate 1.68 times more return on investment than Pimco Dynamic. However, Morgan Stanley is 1.68 times more volatile than Pimco Dynamic Income. It trades about 0.2 of its potential returns per unit of risk. Pimco Dynamic Income is currently generating about 0.22 per unit of risk. If you would invest  737.00  in Morgan Stanley Emerging on December 27, 2024 and sell it today you would earn a total of  83.50  from holding Morgan Stanley Emerging or generate 11.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Morgan Stanley Emerging  vs.  Pimco Dynamic Income

Morgan Stanley Emerging

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Emerging are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pimco Dynamic Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Dynamic Income are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Pimco Dynamic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Morgan Stanley and Pimco Dynamic

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

The idea behind Morgan Stanley Emerging and Pimco Dynamic Income 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.