Correlation Between Morgan Stanley and Long An

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

Diversification Opportunities for Morgan Stanley and Long An

-0.4

Correlation Coefficient

Morgan Stanley  Long An

Very good diversification

The 3 months correlation between Morgan and Long is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Long An Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long An Food 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 Long An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long An Food has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Long An go up and down completely randomly.

Pair Corralation between Morgan Stanley and Long An

Given the investment horizon of 90 days Morgan Stanley is expected to generate 41.24 times less return on investment than Long An. But when comparing it to its historical volatility, Morgan Stanley Direct is 2.46 times less risky than Long An. It trades about 0.01 of its potential returns per unit of risk. Long An Food is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,696,749  in Long An Food on December 27, 2024 and sell it today you would earn a total of  223,251  from holding Long An Food or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

Morgan Stanley Direct  vs.  Long An Food

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.

Long An Food

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Long An Food are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Long An displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Long An

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

The idea behind Morgan Stanley Direct and Long An Food 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.