Correlation Between Morgan Stanley and Boston Partners

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

Diversification Opportunities for Morgan Stanley and Boston Partners

0.18

Correlation Coefficient

Morgan Stanley  Boston Partners

Average diversification

The 3 months correlation between Morgan and Boston is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Boston Partners Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners Longshort 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 Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners Longshort has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Boston Partners go up and down completely randomly.

Pair Corralation between Morgan Stanley and Boston Partners

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Boston Partners. In addition to that, Morgan Stanley is 1.45 times more volatile than Boston Partners Longshort. It trades about -0.01 of its total potential returns per unit of risk. Boston Partners Longshort is currently generating about 0.11 per unit of volatility. If you would invest  1,217  in Boston Partners Longshort on December 28, 2024 and sell it today you would earn a total of  52.00  from holding Boston Partners Longshort or generate 4.27% 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.  Boston Partners Longshort

Morgan Stanley Direct

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Direct has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Boston Partners Longshort

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Partners Longshort are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Boston Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Boston Partners

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

The idea behind Morgan Stanley Direct and Boston Partners Longshort 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.