Correlation Between Morgan Stanley and Fubon Dow

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

Diversification Opportunities for Morgan Stanley and Fubon Dow

0.36

Correlation Coefficient

Morgan Stanley  Fubon Dow

Weak diversification

The 3 months correlation between Morgan and Fubon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Fubon Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Dow Jones 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Dow Jones has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Fubon Dow go up and down completely randomly.

Pair Corralation between Morgan Stanley and Fubon Dow

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Fubon Dow. In addition to that, Morgan Stanley is 1.29 times more volatile than Fubon Dow Jones. It trades about -0.06 of its total potential returns per unit of risk. Fubon Dow Jones is currently generating about 0.14 per unit of volatility. If you would invest  2,221  in Fubon Dow Jones on December 4, 2024 and sell it today you would earn a total of  132.00  from holding Fubon Dow Jones or generate 5.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.67%
Values	Daily Returns

Morgan Stanley Direct  vs.  Fubon Dow Jones

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Fubon Dow Jones

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Dow Jones are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fubon Dow may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Morgan Stanley and Fubon Dow

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

The idea behind Morgan Stanley Direct and Fubon Dow Jones 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.