Correlation Between Morgan Stanley and Polar Capital

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

Diversification Opportunities for Morgan Stanley and Polar Capital

0.84

Correlation Coefficient

Morgan Stanley  Polar Capital

Very poor diversification

The 3 months correlation between Morgan and Polar is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Polar Capital Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Funds 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Funds has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Polar Capital go up and down completely randomly.

Pair Corralation between Morgan Stanley and Polar Capital

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.17 times less return on investment than Polar Capital. In addition to that, Morgan Stanley is 1.89 times more volatile than Polar Capital Funds. It trades about 0.05 of its total potential returns per unit of risk. Polar Capital Funds is currently generating about 0.1 per unit of volatility. If you would invest  34,818  in Polar Capital Funds on September 22, 2024 and sell it today you would earn a total of  479.00  from holding Polar Capital Funds or generate 1.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Morgan Stanley Direct  vs.  Polar Capital Funds

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

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

Polar Capital Funds

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Funds are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Polar Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Polar Capital

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

The idea behind Morgan Stanley Direct and Polar Capital Funds 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..