Correlation Between Morgan Stanley and Catalyst Metals

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

Diversification Opportunities for Morgan Stanley and Catalyst Metals

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between Morgan and Catalyst is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Catalyst Metals go up and down completely randomly.

Pair Corralation between Morgan Stanley and Catalyst Metals

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.32 times less return on investment than Catalyst Metals. But when comparing it to its historical volatility, Morgan Stanley Direct is 5.14 times less risky than Catalyst Metals. It trades about 0.14 of its potential returns per unit of risk. Catalyst Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  281.00  in Catalyst Metals on September 15, 2024 and sell it today you would earn a total of  9.00  from holding Catalyst Metals or generate 3.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.46%
ValuesDaily Returns

Morgan Stanley Direct  vs.  Catalyst Metals

 Performance 
       Timeline  
Morgan Stanley Direct 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Catalyst Metals 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Catalyst Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Morgan Stanley and Catalyst Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Morgan Stanley and Catalyst Metals

The main advantage of trading using opposite Morgan Stanley and Catalyst Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Catalyst Metals 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 Catalyst Metals will offset losses from the drop in Catalyst Metals' long position.
The idea behind Morgan Stanley Direct and Catalyst Metals 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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