Correlation Between Morgan Stanley and Absa Group

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

Diversification Opportunities for Morgan Stanley and Absa Group

-0.13

Correlation Coefficient

Morgan Stanley  Absa Group

Good diversification

The 3 months correlation between Morgan and Absa is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Absa Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group 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 Absa Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Group has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Absa Group go up and down completely randomly.

Pair Corralation between Morgan Stanley and Absa Group

Given the investment horizon of 90 days Morgan Stanley is expected to generate 3.04 times less return on investment than Absa Group. But when comparing it to its historical volatility, Morgan Stanley Direct is 2.3 times less risky than Absa Group. It trades about 0.01 of its potential returns per unit of risk. Absa Group Ltd is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,057  in Absa Group Ltd on December 25, 2024 and sell it today you would earn a total of  0.00  from holding Absa Group Ltd or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Morgan Stanley Direct  vs.  Absa Group Ltd

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.

Absa Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Absa Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Absa Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Absa Group

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

The idea behind Morgan Stanley Direct and Absa Group Ltd 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.