Correlation Between Morgan Stanley and Aspen Pharmacare

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

Diversification Opportunities for Morgan Stanley and Aspen Pharmacare

-0.4

Correlation Coefficient

Morgan Stanley  Aspen Pharmacare

Very good diversification

The 3 months correlation between Morgan and Aspen is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Aspen Pharmacare Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Pharmacare Holdings 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 Aspen Pharmacare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Pharmacare Holdings has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Aspen Pharmacare go up and down completely randomly.

Pair Corralation between Morgan Stanley and Aspen Pharmacare

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.0 times less return on investment than Aspen Pharmacare. But when comparing it to its historical volatility, Morgan Stanley Direct is 2.35 times less risky than Aspen Pharmacare. It trades about 0.01 of its potential returns per unit of risk. Aspen Pharmacare Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,700,000  in Aspen Pharmacare Holdings on December 26, 2024 and sell it today you would lose (8,400) from holding Aspen Pharmacare Holdings or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Morgan Stanley Direct  vs.  Aspen Pharmacare Holdings

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.

Aspen Pharmacare Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aspen Pharmacare Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aspen Pharmacare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Morgan Stanley and Aspen Pharmacare

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

The idea behind Morgan Stanley Direct and Aspen Pharmacare Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.