Correlation Between Morgan Stanley and Honeywell International

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

Diversification Opportunities for Morgan Stanley and Honeywell International

0.51

Correlation Coefficient

Morgan Stanley  Honeywell International

Very weak diversification

The 3 months correlation between Morgan and Honeywell is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International 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 Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Honeywell International go up and down completely randomly.

Pair Corralation between Morgan Stanley and Honeywell International

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.63 times more return on investment than Honeywell International. However, Morgan Stanley Direct is 1.59 times less risky than Honeywell International. It trades about -0.01 of its potential returns per unit of risk. Honeywell International is currently generating about -0.11 per unit of risk. If you would invest  2,083  in Morgan Stanley Direct on December 29, 2024 and sell it today you would lose (16.00) from holding Morgan Stanley Direct or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Morgan Stanley Direct  vs.  Honeywell International

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Honeywell International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honeywell International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Morgan Stanley and Honeywell International

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

The idea behind Morgan Stanley Direct and Honeywell International 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 Valuation module to check real value of public entities based on technical and fundamental data.