Correlation Between Morgan Stanley and Ames National

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

Diversification Opportunities for Morgan Stanley and Ames National

-0.35

Correlation Coefficient

Morgan Stanley  Ames National

Very good diversification

The 3 months correlation between Morgan and Ames is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Ames National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ames National 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 Ames National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ames National has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Ames National go up and down completely randomly.

Pair Corralation between Morgan Stanley and Ames National

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.47 times less return on investment than Ames National. But when comparing it to its historical volatility, Morgan Stanley Direct is 2.23 times less risky than Ames National. It trades about 0.36 of its potential returns per unit of risk. Ames National is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,596  in Ames National on October 20, 2024 and sell it today you would earn a total of  146.00  from holding Ames National or generate 9.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Ames National

Morgan Stanley Direct

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ames National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ames National are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Ames National is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Ames National

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

The idea behind Morgan Stanley Direct and Ames National 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.