Correlation Between Morgan Stanley and Tangerine Equity

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

Diversification Opportunities for Morgan Stanley and Tangerine Equity

0.84

Correlation Coefficient

Morgan Stanley  Tangerine Equity

Very poor diversification

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

Pair Corralation between Morgan Stanley and Tangerine Equity

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.35 times more return on investment than Tangerine Equity. However, Morgan Stanley is 1.35 times more volatile than Tangerine Equity Growth. It trades about 0.02 of its potential returns per unit of risk. Tangerine Equity Growth is currently generating about 0.02 per unit of risk. If you would invest  2,077  in Morgan Stanley Direct on October 2, 2024 and sell it today you would earn a total of  6.00  from holding Morgan Stanley Direct or generate 0.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Morgan Stanley Direct  vs.  Tangerine Equity Growth

Morgan Stanley Direct

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Tangerine Equity Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tangerine Equity Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite quite weak forward-looking signals, Tangerine Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Tangerine Equity

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

The idea behind Morgan Stanley Direct and Tangerine Equity Growth 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.