Correlation Between Morgan Stanley and Fidelity Low

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

Diversification Opportunities for Morgan Stanley and Fidelity Low

-0.24

Correlation Coefficient

Morgan Stanley  Fidelity Low

Very good diversification

The 3 months correlation between Morgan and Fidelity is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Fidelity Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Duration 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 Fidelity Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Duration has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Fidelity Low go up and down completely randomly.

Pair Corralation between Morgan Stanley and Fidelity Low

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Fidelity Low. In addition to that, Morgan Stanley is 12.01 times more volatile than Fidelity Low Duration. It trades about -0.01 of its total potential returns per unit of risk. Fidelity Low Duration is currently generating about 0.26 per unit of volatility. If you would invest  4,997  in Fidelity Low Duration on December 28, 2024 and sell it today you would earn a total of  62.00  from holding Fidelity Low Duration or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Morgan Stanley Direct  vs.  Fidelity Low Duration

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

Fidelity Low Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Low Duration are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Fidelity Low 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 Fidelity Low

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

The idea behind Morgan Stanley Direct and Fidelity Low Duration 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.