Correlation Between Morgan Stanley and Labor Smart

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

Diversification Opportunities for Morgan Stanley and Labor Smart

0.6

Correlation Coefficient

Morgan Stanley  Labor Smart

Poor diversification

The 3 months correlation between Morgan and Labor is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Labor Smart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labor Smart 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 Labor Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labor Smart has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Labor Smart go up and down completely randomly.

Pair Corralation between Morgan Stanley and Labor Smart

Given the investment horizon of 90 days Morgan Stanley is expected to generate 22.53 times less return on investment than Labor Smart. But when comparing it to its historical volatility, Morgan Stanley Direct is 7.7 times less risky than Labor Smart. It trades about 0.01 of its potential returns per unit of risk. Labor Smart is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.14  in Labor Smart on December 27, 2024 and sell it today you would lose (0.01) from holding Labor Smart or give up 7.14% of portfolio value over 90 days.

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

Morgan Stanley Direct  vs.  Labor Smart

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

Labor Smart

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Labor Smart are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Labor Smart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Morgan Stanley and Labor Smart

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

The idea behind Morgan Stanley Direct and Labor Smart 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.