Correlation Between Morgan Stanley and Oriental Carbon

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

Diversification Opportunities for Morgan Stanley and Oriental Carbon

-0.43

Correlation Coefficient

Morgan Stanley  Oriental Carbon

Very good diversification

The 3 months correlation between Morgan and Oriental is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Oriental Carbon Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Carbon Chemicals 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 Oriental Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Carbon Chemicals has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Oriental Carbon go up and down completely randomly.

Pair Corralation between Morgan Stanley and Oriental Carbon

Given the investment horizon of 90 days Morgan Stanley is expected to generate 4.81 times less return on investment than Oriental Carbon. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.86 times less risky than Oriental Carbon. It trades about 0.06 of its potential returns per unit of risk. Oriental Carbon Chemicals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  22,915  in Oriental Carbon Chemicals on September 19, 2024 and sell it today you would earn a total of  1,696  from holding Oriental Carbon Chemicals or generate 7.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Oriental Carbon Chemicals

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

Good

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 weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Oriental Carbon is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Morgan Stanley and Oriental Carbon

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

The idea behind Morgan Stanley Direct and Oriental Carbon Chemicals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.