Correlation Between Morgan Stanley and Franklin Small

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

Diversification Opportunities for Morgan Stanley and Franklin Small

0.88

Correlation Coefficient

Morgan Stanley  Franklin Small

Very poor diversification

The 3 months correlation between Morgan and Franklin is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Franklin Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Mid 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 Franklin Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Small Mid has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Franklin Small go up and down completely randomly.

Pair Corralation between Morgan Stanley and Franklin Small

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.63 times less return on investment than Franklin Small. In addition to that, Morgan Stanley is 1.64 times more volatile than Franklin Small Mid Cap. It trades about 0.03 of its total potential returns per unit of risk. Franklin Small Mid Cap is currently generating about 0.08 per unit of volatility. If you would invest  2,747  in Franklin Small Mid Cap on September 21, 2024 and sell it today you would earn a total of  1,193  from holding Franklin Small Mid Cap or generate 43.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	46.37%
Values	Daily Returns

Morgan Stanley Direct  vs.  Franklin Small Mid Cap

Morgan Stanley Direct

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 7 (%) 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.

Franklin Small Mid

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Small Mid Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Franklin Small 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 Franklin Small

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

The idea behind Morgan Stanley Direct and Franklin Small Mid Cap 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.