Correlation Between Morgan Stanley and Beijing Enterprises

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

Diversification Opportunities for Morgan Stanley and Beijing Enterprises

0.15

Correlation Coefficient

Morgan Stanley  Beijing Enterprises

Average diversification

The 3 months correlation between Morgan and Beijing is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Beijing Enterprises Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Enterprises 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 Beijing Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Enterprises has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Beijing Enterprises go up and down completely randomly.

Pair Corralation between Morgan Stanley and Beijing Enterprises

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.03 times less return on investment than Beijing Enterprises. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.57 times less risky than Beijing Enterprises. It trades about 0.06 of its potential returns per unit of risk. Beijing Enterprises Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  329.00  in Beijing Enterprises Holdings on September 20, 2024 and sell it today you would earn a total of  4.00  from holding Beijing Enterprises Holdings or generate 1.22% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Beijing Enterprises Holdings

Morgan Stanley Direct

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 7 (%) 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.

Beijing Enterprises

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Enterprises Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Beijing Enterprises may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Beijing Enterprises

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

The idea behind Morgan Stanley Direct and Beijing Enterprises 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.