Correlation Between Morgan Stanley and Columbia Emerging

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

Diversification Opportunities for Morgan Stanley and Columbia Emerging

-0.56

Correlation Coefficient

Morgan Stanley  Columbia Emerging

Excellent diversification

The 3 months correlation between Morgan and Columbia is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Columbia Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Emerging Markets 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 Columbia Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Emerging Markets has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Columbia Emerging go up and down completely randomly.

Pair Corralation between Morgan Stanley and Columbia Emerging

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.74 times more return on investment than Columbia Emerging. However, Morgan Stanley is 1.74 times more volatile than Columbia Emerging Markets. It trades about 0.03 of its potential returns per unit of risk. Columbia Emerging Markets is currently generating about 0.01 per unit of risk. If you would invest  1,862  in Morgan Stanley Direct on October 14, 2024 and sell it today you would earn a total of  190.00  from holding Morgan Stanley Direct or generate 10.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	49.19%
Values	Daily Returns

Morgan Stanley Direct  vs.  Columbia Emerging Markets

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.

Columbia Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Morgan Stanley and Columbia Emerging

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

The idea behind Morgan Stanley Direct and Columbia Emerging Markets 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .