Correlation Between Morgan Stanley and Great West

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

Diversification Opportunities for Morgan Stanley and Great West

0.84

Correlation Coefficient

Morgan Stanley  Great West

Very poor diversification

The 3 months correlation between Morgan and Great is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Great West Multi Manager Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Multi 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Multi has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Great West go up and down completely randomly.

Pair Corralation between Morgan Stanley and Great West

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.97 times less return on investment than Great West. In addition to that, Morgan Stanley is 1.65 times more volatile than Great West Multi Manager Large. It trades about 0.03 of its total potential returns per unit of risk. Great West Multi Manager Large is currently generating about 0.11 per unit of volatility. If you would invest  790.00  in Great West Multi Manager Large on September 28, 2024 and sell it today you would earn a total of  525.00  from holding Great West Multi Manager Large or generate 66.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	47.18%
Values	Daily Returns

Morgan Stanley Direct  vs.  Great West Multi Manager Large

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Great West Multi

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Great West Multi Manager Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Great West

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

The idea behind Morgan Stanley Direct and Great West Multi Manager Large 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.