Correlation Between Morgan Stanley and Huaxia Eye

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

Diversification Opportunities for Morgan Stanley and Huaxia Eye

0.29

Correlation Coefficient

Morgan Stanley  Huaxia Eye

Modest diversification

The 3 months correlation between Morgan and Huaxia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Huaxia Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Eye Hospital 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 Huaxia Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Eye Hospital has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Huaxia Eye go up and down completely randomly.

Pair Corralation between Morgan Stanley and Huaxia Eye

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.52 times more return on investment than Huaxia Eye. However, Morgan Stanley Direct is 1.94 times less risky than Huaxia Eye. It trades about 0.05 of its potential returns per unit of risk. Huaxia Eye Hospital is currently generating about -0.04 per unit of risk. If you would invest  2,080  in Morgan Stanley Direct on September 25, 2024 and sell it today you would earn a total of  21.00  from holding Morgan Stanley Direct or generate 1.01% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Huaxia Eye Hospital

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.

Huaxia Eye Hospital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Eye Hospital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Eye sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Huaxia Eye

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

The idea behind Morgan Stanley Direct and Huaxia Eye Hospital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.