Correlation Between Morgan Stanley and Emera Pref

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

Diversification Opportunities for Morgan Stanley and Emera Pref

0.89

Correlation Coefficient

Morgan Stanley  Emera Pref

Very poor diversification

The 3 months correlation between Morgan and Emera is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Emera Pref A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref A 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 Emera Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref A has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Emera Pref go up and down completely randomly.

Pair Corralation between Morgan Stanley and Emera Pref

Given the investment horizon of 90 days Morgan Stanley is expected to generate 5.76 times less return on investment than Emera Pref. In addition to that, Morgan Stanley is 1.41 times more volatile than Emera Pref A. It trades about 0.01 of its total potential returns per unit of risk. Emera Pref A is currently generating about 0.11 per unit of volatility. If you would invest  1,596  in Emera Pref A on September 24, 2024 and sell it today you would earn a total of  29.00  from holding Emera Pref A or generate 1.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Morgan Stanley Direct  vs.  Emera Pref A

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Emera Pref A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Emera Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Emera Pref

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

The idea behind Morgan Stanley Direct and Emera Pref A 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.