Correlation Between Morgan Stanley and M3 Brigade

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and M3 Brigade 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 M3 Brigade 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 M3 Brigade Acquisition V, you can compare the effects of market volatilities on Morgan Stanley and M3 Brigade 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 M3 Brigade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and M3 Brigade.

Diversification Opportunities for Morgan Stanley and M3 Brigade

0.03

Correlation Coefficient

Morgan Stanley  M3 Brigade

Significant diversification

The 3 months correlation between Morgan and MBAVW is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and M3 Brigade Acquisition V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Brigade Acquisition 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 M3 Brigade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Brigade Acquisition has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and M3 Brigade go up and down completely randomly.

Pair Corralation between Morgan Stanley and M3 Brigade

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the M3 Brigade. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 7.56 times less risky than M3 Brigade. The stock trades about -0.02 of its potential returns per unit of risk. The M3 Brigade Acquisition V is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13.00  in M3 Brigade Acquisition V on September 22, 2024 and sell it today you would earn a total of  4.00  from holding M3 Brigade Acquisition V or generate 30.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	33.59%
Values	Daily Returns

Morgan Stanley Direct  vs.  M3 Brigade Acquisition V

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

M3 Brigade Acquisition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, M3 Brigade showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and M3 Brigade

The main advantage of trading using opposite Morgan Stanley and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, M3 Brigade 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 M3 Brigade will offset losses from the drop in M3 Brigade's long position.

The idea behind Morgan Stanley Direct and M3 Brigade Acquisition V 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.