Correlation Between Morgan Stanley and Shan Dong

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

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

Diversification Opportunities for Morgan Stanley and Shan Dong

0.45

Correlation Coefficient

Morgan Stanley  Shan Dong

Very weak diversification

The 3 months correlation between Morgan and Shan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Shan Dong Dong E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Dong Dong 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 Direct are associated (or correlated) with Shan Dong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Dong Dong has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Shan Dong go up and down completely randomly.

Pair Corralation between Morgan Stanley and Shan Dong

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.75 times more return on investment than Shan Dong. However, Morgan Stanley Direct is 1.33 times less risky than Shan Dong. It trades about 0.2 of its potential returns per unit of risk. Shan Dong Dong E is currently generating about 0.09 per unit of risk. If you would invest  2,055  in Morgan Stanley Direct on September 19, 2024 and sell it today you would earn a total of  83.00  from holding Morgan Stanley Direct or generate 4.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.3%
Values	Daily Returns

Morgan Stanley Direct  vs.  Shan Dong Dong E

Morgan Stanley Direct

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shan Dong Dong

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shan Dong Dong E are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shan Dong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Shan Dong

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

The idea behind Morgan Stanley Direct and Shan Dong Dong E 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..