Correlation Between Morgan Stanley and STELLA-JONES INC

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

Diversification Opportunities for Morgan Stanley and STELLA-JONES INC

-0.79

Correlation Coefficient

Morgan Stanley  STELLA-JONES INC

Pay attention - limited upside

The 3 months correlation between Morgan and STELLA-JONES is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and STELLA JONES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STELLA JONES INC 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 STELLA-JONES INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STELLA JONES INC has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and STELLA-JONES INC go up and down completely randomly.

Pair Corralation between Morgan Stanley and STELLA-JONES INC

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the STELLA-JONES INC. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 1.65 times less risky than STELLA-JONES INC. The stock trades about -0.08 of its potential returns per unit of risk. The STELLA JONES INC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,720  in STELLA JONES INC on October 12, 2024 and sell it today you would lose (20.00) from holding STELLA JONES INC or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  STELLA JONES INC

Morgan Stanley Direct

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 6 (%) 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.

STELLA JONES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STELLA JONES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Morgan Stanley and STELLA-JONES INC

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

The idea behind Morgan Stanley Direct and STELLA JONES INC 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.