Correlation Between Morgan Stanley and American Funds

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and American Funds 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 American Funds 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 American Funds 2020, you can compare the effects of market volatilities on Morgan Stanley and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and American Funds.

Diversification Opportunities for Morgan Stanley and American Funds

-0.16

Correlation Coefficient

Morgan Stanley  American Funds

Good diversification

The 3 months correlation between Morgan and American is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and American Funds 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2020 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2020 has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and American Funds go up and down completely randomly.

Pair Corralation between Morgan Stanley and American Funds

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the American Funds. In addition to that, Morgan Stanley is 2.41 times more volatile than American Funds 2020. It trades about -0.01 of its total potential returns per unit of risk. American Funds 2020 is currently generating about 0.09 per unit of volatility. If you would invest  1,342  in American Funds 2020 on December 27, 2024 and sell it today you would earn a total of  29.00  from holding American Funds 2020 or generate 2.16% 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.  American Funds 2020

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

American Funds 2020

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2020 are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds 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 American Funds

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

The idea behind Morgan Stanley Direct and American Funds 2020 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.