Correlation Between Morgan Stanley and WSP Global

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

Diversification Opportunities for Morgan Stanley and WSP Global

0.58

Correlation Coefficient

Morgan Stanley  WSP Global

Very weak diversification

The 3 months correlation between Morgan and WSP is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global 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 WSP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WSP Global has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and WSP Global go up and down completely randomly.

Pair Corralation between Morgan Stanley and WSP Global

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.19 times less return on investment than WSP Global. In addition to that, Morgan Stanley is 1.16 times more volatile than WSP Global. It trades about 0.03 of its total potential returns per unit of risk. WSP Global is currently generating about 0.08 per unit of volatility. If you would invest  12,369  in WSP Global on September 23, 2024 and sell it today you would earn a total of  4,031  from holding WSP Global or generate 32.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	84.67%
Values	Daily Returns

Morgan Stanley Direct  vs.  WSP Global

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

WSP Global

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WSP Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and WSP Global

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

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