Correlation Between Morgan Stanley and Bowler Metcalf

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

Diversification Opportunities for Morgan Stanley and Bowler Metcalf

0.09

Correlation Coefficient

Morgan Stanley  Bowler Metcalf

Significant diversification

The 3 months correlation between Morgan and Bowler is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Bowler Metcalf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowler Metcalf 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 Bowler Metcalf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowler Metcalf has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Bowler Metcalf go up and down completely randomly.

Pair Corralation between Morgan Stanley and Bowler Metcalf

Given the investment horizon of 90 days Morgan Stanley is expected to generate 3.55 times less return on investment than Bowler Metcalf. But when comparing it to its historical volatility, Morgan Stanley Direct is 2.88 times less risky than Bowler Metcalf. It trades about 0.03 of its potential returns per unit of risk. Bowler Metcalf is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  88,708  in Bowler Metcalf on October 13, 2024 and sell it today you would earn a total of  47,492  from holding Bowler Metcalf or generate 53.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	49.69%
Values	Daily Returns

Morgan Stanley Direct  vs.  Bowler Metcalf

Morgan Stanley Direct

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Bowler Metcalf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bowler Metcalf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bowler Metcalf 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 Bowler Metcalf

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

The idea behind Morgan Stanley Direct and Bowler Metcalf 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.