Correlation Between Morgan Stanley and Lyxor Core

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

Diversification Opportunities for Morgan Stanley and Lyxor Core

0.2

Correlation Coefficient

Morgan Stanley  Lyxor Core

Modest diversification

The 3 months correlation between Morgan and Lyxor is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Lyxor Core UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Core UK 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 Lyxor Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Core UK has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Lyxor Core go up and down completely randomly.

Pair Corralation between Morgan Stanley and Lyxor Core

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.54 times more return on investment than Lyxor Core. However, Morgan Stanley is 1.54 times more volatile than Lyxor Core UK. It trades about -0.01 of its potential returns per unit of risk. Lyxor Core UK is currently generating about -0.02 per unit of risk. If you would invest  2,083  in Morgan Stanley Direct on December 29, 2024 and sell it today you would lose (16.00) from holding Morgan Stanley Direct or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Morgan Stanley Direct  vs.  Lyxor Core UK

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

Lyxor Core UK

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lyxor Core UK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lyxor Core is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Morgan Stanley and Lyxor Core

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

The idea behind Morgan Stanley Direct and Lyxor Core UK 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.