Correlation Between Morgan Stanley and Northern Star

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

Diversification Opportunities for Morgan Stanley and Northern Star

-0.3

Correlation Coefficient

Morgan Stanley  Northern Star

Very good diversification

The 3 months correlation between Morgan and Northern is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources 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 Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Northern Star go up and down completely randomly.

Pair Corralation between Morgan Stanley and Northern Star

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Northern Star. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 1.88 times less risky than Northern Star. The stock trades about -0.03 of its potential returns per unit of risk. The Northern Star Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  781.00  in Northern Star Resources on October 7, 2024 and sell it today you would earn a total of  174.00  from holding Northern Star Resources or generate 22.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Morgan Stanley Direct  vs.  Northern Star Resources

Morgan Stanley Direct

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 9 (%) 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 February 2025.

Northern Star Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Star Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Northern Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Morgan Stanley and Northern Star

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

The idea behind Morgan Stanley Direct and Northern Star Resources 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.