Correlation Between Morgan Stanley and Sinotrans

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

Diversification Opportunities for Morgan Stanley and Sinotrans

0.46

Correlation Coefficient

Morgan Stanley  Sinotrans

Very weak diversification

The 3 months correlation between Morgan and Sinotrans is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Sinotrans Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinotrans Class 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 Sinotrans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinotrans Class has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Sinotrans go up and down completely randomly.

Pair Corralation between Morgan Stanley and Sinotrans

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.6 times less return on investment than Sinotrans. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.36 times less risky than Sinotrans. It trades about 0.03 of its potential returns per unit of risk. Sinotrans Ltd Class is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  450.00  in Sinotrans Ltd Class on September 23, 2024 and sell it today you would earn a total of  73.00  from holding Sinotrans Ltd Class or generate 16.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.23%
Values	Daily Returns

Morgan Stanley Direct  vs.  Sinotrans Ltd Class

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.

Sinotrans Class

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinotrans Ltd Class are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinotrans sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Sinotrans

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

The idea behind Morgan Stanley Direct and Sinotrans Ltd Class 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.