Correlation Between Morgan Stanley and Batu Kawan

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

Diversification Opportunities for Morgan Stanley and Batu Kawan

0.65

Correlation Coefficient

Morgan Stanley  Batu Kawan

Poor diversification

The 3 months correlation between Morgan and Batu is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Batu Kawan Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Batu Kawan Bhd 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 Batu Kawan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Batu Kawan Bhd has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Batu Kawan go up and down completely randomly.

Pair Corralation between Morgan Stanley and Batu Kawan

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 2.29 times more return on investment than Batu Kawan. However, Morgan Stanley is 2.29 times more volatile than Batu Kawan Bhd. It trades about 0.03 of its potential returns per unit of risk. Batu Kawan Bhd is currently generating about -0.01 per unit of risk. If you would invest  1,907  in Morgan Stanley Direct on September 28, 2024 and sell it today you would earn a total of  194.00  from holding Morgan Stanley Direct or generate 10.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	49.47%
Values	Daily Returns

Morgan Stanley Direct  vs.  Batu Kawan Bhd

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Batu Kawan Bhd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Batu Kawan Bhd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Batu Kawan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Morgan Stanley and Batu Kawan

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

The idea behind Morgan Stanley Direct and Batu Kawan Bhd 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.