Correlation Between Morgan Stanley and Air Asia

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

Diversification Opportunities for Morgan Stanley and Air Asia

0.22

Correlation Coefficient

Morgan Stanley  Air Asia

Modest diversification

The 3 months correlation between Morgan and Air is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Air Asia Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Asia 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 Air Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Asia has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Air Asia go up and down completely randomly.

Pair Corralation between Morgan Stanley and Air Asia

Given the investment horizon of 90 days Morgan Stanley is expected to generate 56.71 times less return on investment than Air Asia. But when comparing it to its historical volatility, Morgan Stanley Direct is 3.5 times less risky than Air Asia. It trades about 0.01 of its potential returns per unit of risk. Air Asia Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,197  in Air Asia Co on December 27, 2024 and sell it today you would earn a total of  548.00  from holding Air Asia Co or generate 17.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

Morgan Stanley Direct  vs.  Air Asia Co

Morgan Stanley Direct

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Direct has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Air Asia

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Asia Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Air Asia showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Air Asia

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

The idea behind Morgan Stanley Direct and Air Asia Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.