Correlation Between Morgan Stanley and Electromedical Technologies

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

Diversification Opportunities for Morgan Stanley and Electromedical Technologies

-0.45

Correlation Coefficient

Morgan Stanley  Electromedical Technologies

Very good diversification

The 3 months correlation between Morgan and Electromedical is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Electromedical Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromedical Technologies 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 Electromedical Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromedical Technologies has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Electromedical Technologies go up and down completely randomly.

Pair Corralation between Morgan Stanley and Electromedical Technologies

Given the investment horizon of 90 days Morgan Stanley is expected to generate 7.25 times less return on investment than Electromedical Technologies. But when comparing it to its historical volatility, Morgan Stanley Direct is 8.92 times less risky than Electromedical Technologies. It trades about 0.03 of its potential returns per unit of risk. Electromedical Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Electromedical Technologies on September 23, 2024 and sell it today you would lose (0.57) from holding Electromedical Technologies or give up 95.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.68%
Values	Daily Returns

Morgan Stanley Direct  vs.  Electromedical Technologies

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 inconsistent fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Electromedical Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Electromedical Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Electromedical Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Electromedical Technologies

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

The idea behind Morgan Stanley Direct and Electromedical Technologies 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.