Correlation Between Morgan Stanley and Modern Times

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

Diversification Opportunities for Morgan Stanley and Modern Times

0.89

Correlation Coefficient

Morgan Stanley  Modern Times

Very poor diversification

The 3 months correlation between Morgan and Modern is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Modern Times Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modern Times Group 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 Modern Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modern Times Group has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Modern Times go up and down completely randomly.

Pair Corralation between Morgan Stanley and Modern Times

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.66 times more return on investment than Modern Times. However, Morgan Stanley Direct is 1.51 times less risky than Modern Times. It trades about 0.03 of its potential returns per unit of risk. Modern Times Group is currently generating about 0.02 per unit of risk. If you would invest  1,907  in Morgan Stanley Direct on September 23, 2024 and sell it today you would earn a total of  177.00  from holding Morgan Stanley Direct or generate 9.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	46.4%
Values	Daily Returns

Morgan Stanley Direct  vs.  Modern Times Group

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.

Modern Times Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Times Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Modern Times unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Modern Times

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

The idea behind Morgan Stanley Direct and Modern Times Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.