Correlation Between Morgan Stanley and Namyang Dairy

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Namyang Dairy 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 Namyang Dairy 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 Namyang Dairy Products, you can compare the effects of market volatilities on Morgan Stanley and Namyang Dairy 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 Namyang Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Namyang Dairy.

Diversification Opportunities for Morgan Stanley and Namyang Dairy

0.68

Correlation Coefficient

Morgan Stanley  Namyang Dairy

Poor diversification

The 3 months correlation between Morgan and Namyang is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Namyang Dairy Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy Products 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 Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy Products has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Namyang Dairy go up and down completely randomly.

Pair Corralation between Morgan Stanley and Namyang Dairy

Given the investment horizon of 90 days Morgan Stanley is expected to generate 58.43 times less return on investment than Namyang Dairy. But when comparing it to its historical volatility, Morgan Stanley Direct is 33.1 times less risky than Namyang Dairy. It trades about 0.03 of its potential returns per unit of risk. Namyang Dairy Products is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,761,790  in Namyang Dairy Products on September 19, 2024 and sell it today you would earn a total of  1,548,210  from holding Namyang Dairy Products or generate 32.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.27%
Values	Daily Returns

Morgan Stanley Direct  vs.  Namyang Dairy Products

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) 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.

Namyang Dairy Products

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namyang Dairy Products are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namyang Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Namyang Dairy

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

The idea behind Morgan Stanley Direct and Namyang Dairy Products 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.