Correlation Between Morgan Stanley and Fubon MSCI

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

Diversification Opportunities for Morgan Stanley and Fubon MSCI

0.55

Correlation Coefficient

Morgan Stanley  Fubon MSCI

Very weak diversification

The 3 months correlation between Morgan and Fubon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Fubon MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon MSCI Taiwan 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 Fubon MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon MSCI Taiwan has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Fubon MSCI go up and down completely randomly.

Pair Corralation between Morgan Stanley and Fubon MSCI

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.73 times more return on investment than Fubon MSCI. However, Morgan Stanley Direct is 1.37 times less risky than Fubon MSCI. It trades about 0.0 of its potential returns per unit of risk. Fubon MSCI Taiwan is currently generating about -0.07 per unit of risk. If you would invest  2,068  in Morgan Stanley Direct on December 26, 2024 and sell it today you would lose (3.00) from holding Morgan Stanley Direct or give up 0.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.16%
Values	Daily Returns

Morgan Stanley Direct  vs.  Fubon MSCI Taiwan

Morgan Stanley Direct

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Direct has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Fubon MSCI Taiwan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fubon MSCI Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fubon MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Morgan Stanley and Fubon MSCI

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

The idea behind Morgan Stanley Direct and Fubon MSCI Taiwan 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.