Correlation Between Morgan Stanley and LSK

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

Diversification Opportunities for Morgan Stanley and LSK

0.57

Correlation Coefficient

Morgan Stanley  LSK

Very weak diversification

The 3 months correlation between Morgan and LSK is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and LSK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LSK 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 LSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LSK has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and LSK go up and down completely randomly.

Pair Corralation between Morgan Stanley and LSK

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.16 times more return on investment than LSK. However, Morgan Stanley Direct is 6.39 times less risky than LSK. It trades about -0.06 of its potential returns per unit of risk. LSK is currently generating about -0.03 per unit of risk. If you would invest  2,080  in Morgan Stanley Direct on October 13, 2024 and sell it today you would lose (28.00) from holding Morgan Stanley Direct or give up 1.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Morgan Stanley Direct  vs.  LSK

Morgan Stanley Direct

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 6 (%) 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 current stock price mess, may contribute to short-term losses for the institutional investors.

LSK

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LSK are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, LSK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and LSK

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

The idea behind Morgan Stanley Direct and LSK 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.