Correlation Between Morgan Stanley and Baidu

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

Diversification Opportunities for Morgan Stanley and Baidu

-0.29

Correlation Coefficient

Morgan Stanley  Baidu

Very good diversification

The 3 months correlation between Morgan and Baidu is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc 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 Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Baidu go up and down completely randomly.

Pair Corralation between Morgan Stanley and Baidu

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.11 times less return on investment than Baidu. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.83 times less risky than Baidu. It trades about 0.0 of its potential returns per unit of risk. Baidu Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,532  in Baidu Inc on October 13, 2024 and sell it today you would lose (143.00) from holding Baidu Inc or give up 4.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.31%
Values	Daily Returns

Morgan Stanley Direct  vs.  Baidu Inc

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

Baidu Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baidu Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Morgan Stanley and Baidu

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

The idea behind Morgan Stanley Direct and Baidu Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.