Correlation Between Morgan Stanley and Oakmark Select

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

Diversification Opportunities for Morgan Stanley and Oakmark Select

0.63

Correlation Coefficient

Morgan Stanley  Oakmark Select

Poor diversification

The 3 months correlation between Morgan and Oakmark is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Oakmark Select Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Select 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 Oakmark Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark Select has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Oakmark Select go up and down completely randomly.

Pair Corralation between Morgan Stanley and Oakmark Select

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.0 times more return on investment than Oakmark Select. However, Morgan Stanley Direct is 1.0 times less risky than Oakmark Select. It trades about 0.01 of its potential returns per unit of risk. Oakmark Select Fund is currently generating about 0.0 per unit of risk. If you would invest  2,068  in Morgan Stanley Direct on December 26, 2024 and sell it today you would earn a total of  4.00  from holding Morgan Stanley Direct or generate 0.19% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Oakmark Select Fund

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.

Oakmark Select

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oakmark Select Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Oakmark Select 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 Oakmark Select

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

The idea behind Morgan Stanley Direct and Oakmark Select Fund 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.