Correlation Between Morgan Stanley and Liton Technology

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

Diversification Opportunities for Morgan Stanley and Liton Technology

0.77

Correlation Coefficient

Morgan Stanley  Liton Technology

Poor diversification

The 3 months correlation between Morgan and Liton is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Liton Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liton Technology 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 Liton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liton Technology has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Liton Technology go up and down completely randomly.

Pair Corralation between Morgan Stanley and Liton Technology

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.47 times more return on investment than Liton Technology. However, Morgan Stanley Direct is 2.14 times less risky than Liton Technology. It trades about 0.05 of its potential returns per unit of risk. Liton Technology is currently generating about -0.04 per unit of risk. If you would invest  1,971  in Morgan Stanley Direct on September 21, 2024 and sell it today you would earn a total of  93.00  from holding Morgan Stanley Direct or generate 4.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Liton Technology

Morgan Stanley Direct

Risk-Adjusted Performance

7 of 100

OK

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

Liton Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liton Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liton Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Morgan Stanley and Liton Technology

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

The idea behind Morgan Stanley Direct and Liton Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.