Correlation Between Morgan Stanley and Epiroc AB

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

Diversification Opportunities for Morgan Stanley and Epiroc AB

-0.69

Correlation Coefficient

Morgan Stanley  Epiroc AB

Excellent diversification

The 3 months correlation between Morgan and Epiroc is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Epiroc AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epiroc AB 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 Epiroc AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epiroc AB has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Epiroc AB go up and down completely randomly.

Pair Corralation between Morgan Stanley and Epiroc AB

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.65 times more return on investment than Epiroc AB. However, Morgan Stanley Direct is 1.55 times less risky than Epiroc AB. It trades about -0.08 of its potential returns per unit of risk. Epiroc AB is currently generating about -0.26 per unit of risk. If you would invest  2,089  in Morgan Stanley Direct on October 12, 2024 and sell it today you would lose (36.00) from holding Morgan Stanley Direct or give up 1.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Epiroc AB

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Epiroc AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Epiroc AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Morgan Stanley and Epiroc AB

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

The idea behind Morgan Stanley Direct and Epiroc AB 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.