Correlation Between Morgan Stanley and ASML HOLDING

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

Diversification Opportunities for Morgan Stanley and ASML HOLDING

-0.36

Correlation Coefficient

Morgan Stanley  ASML HOLDING

Very good diversification

The 3 months correlation between Morgan and ASML is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and ASML HOLDING NY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML HOLDING NY 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 ASML HOLDING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML HOLDING NY has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and ASML HOLDING go up and down completely randomly.

Pair Corralation between Morgan Stanley and ASML HOLDING

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.43 times less return on investment than ASML HOLDING. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.72 times less risky than ASML HOLDING. It trades about 0.22 of its potential returns per unit of risk. ASML HOLDING NY is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  63,000  in ASML HOLDING NY on September 12, 2024 and sell it today you would earn a total of  4,400  from holding ASML HOLDING NY or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Morgan Stanley Direct  vs.  ASML HOLDING NY

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ASML HOLDING NY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASML HOLDING NY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, ASML HOLDING is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Morgan Stanley and ASML HOLDING

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

The idea behind Morgan Stanley Direct and ASML HOLDING NY 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.