Correlation Between Morgan Stanley and Columbia

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

Diversification Opportunities for Morgan Stanley and Columbia

-0.11

Correlation Coefficient

Morgan Stanley  Columbia

Good diversification

The 3 months correlation between Morgan and Columbia is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Columbia Treasury Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Treasury Index 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Treasury Index has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Columbia go up and down completely randomly.

Pair Corralation between Morgan Stanley and Columbia

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Columbia. In addition to that, Morgan Stanley is 2.78 times more volatile than Columbia Treasury Index. It trades about -0.21 of its total potential returns per unit of risk. Columbia Treasury Index is currently generating about 0.29 per unit of volatility. If you would invest  984.00  in Columbia Treasury Index on December 2, 2024 and sell it today you would earn a total of  18.00  from holding Columbia Treasury Index or generate 1.83% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Columbia Treasury Index

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.

Columbia Treasury Index

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Treasury Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia 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 Columbia

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

The idea behind Morgan Stanley Direct and Columbia Treasury Index 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.