Correlation Between Morgan Stanley and Scale All

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

Diversification Opportunities for Morgan Stanley and Scale All

-0.47

Correlation Coefficient

Morgan Stanley  Scale All

Very good diversification

The 3 months correlation between Morgan and Scale is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Scale All Share in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scale All Share 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 Scale All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scale All Share has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Scale All go up and down completely randomly.

Pair Corralation between Morgan Stanley and Scale All

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.34 times more return on investment than Scale All. However, Morgan Stanley is 1.34 times more volatile than Scale All Share. It trades about 0.09 of its potential returns per unit of risk. Scale All Share is currently generating about -0.1 per unit of risk. If you would invest  1,961  in Morgan Stanley Direct on October 4, 2024 and sell it today you would earn a total of  105.00  from holding Morgan Stanley Direct or generate 5.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Morgan Stanley Direct  vs.  Scale All Share

Pair Trading with Morgan Stanley and Scale All

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

The idea behind Morgan Stanley Direct and Scale All Share 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 Anywhere module to track or share privately all of your investments from the convenience of any device.