Correlation Between Morgan Stanley and Secured Options

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

Diversification Opportunities for Morgan Stanley and Secured Options

0.02

Correlation Coefficient

Morgan Stanley  Secured Options

Significant diversification

The 3 months correlation between Morgan and Secured is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Secured Options Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secured Options Portfolio 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 Secured Options. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secured Options Portfolio has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Secured Options go up and down completely randomly.

Pair Corralation between Morgan Stanley and Secured Options

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.74 times more return on investment than Secured Options. However, Morgan Stanley Direct is 1.36 times less risky than Secured Options. It trades about 0.13 of its potential returns per unit of risk. Secured Options Portfolio is currently generating about -0.09 per unit of risk. If you would invest  1,968  in Morgan Stanley Direct on September 29, 2024 and sell it today you would earn a total of  167.00  from holding Morgan Stanley Direct or generate 8.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Secured Options Portfolio

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Secured Options Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Secured Options Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Morgan Stanley and Secured Options

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

The idea behind Morgan Stanley Direct and Secured Options Portfolio 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.