Correlation Between Morgan Stanley and Fubon SP

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

Diversification Opportunities for Morgan Stanley and Fubon SP

-0.23

Correlation Coefficient

Morgan Stanley  Fubon SP

Very good diversification

The 3 months correlation between Morgan and Fubon is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Fubon SP Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon SP Preferred 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon SP Preferred has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Fubon SP go up and down completely randomly.

Pair Corralation between Morgan Stanley and Fubon SP

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.82 times more return on investment than Fubon SP. However, Morgan Stanley is 1.82 times more volatile than Fubon SP Preferred. It trades about 0.16 of its potential returns per unit of risk. Fubon SP Preferred is currently generating about -0.03 per unit of risk. If you would invest  1,934  in Morgan Stanley Direct on September 17, 2024 and sell it today you would earn a total of  184.00  from holding Morgan Stanley Direct or generate 9.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Morgan Stanley Direct  vs.  Fubon SP Preferred

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 fragile fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fubon SP Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fubon SP Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon SP is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Morgan Stanley and Fubon SP

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

The idea behind Morgan Stanley Direct and Fubon SP Preferred 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.