Correlation Between Morgan Stanley and Omnia Holdings

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

Diversification Opportunities for Morgan Stanley and Omnia Holdings

0.78

Correlation Coefficient

Morgan Stanley  Omnia Holdings

Poor diversification

The 3 months correlation between Morgan and Omnia is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Omnia Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnia Holdings 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 Omnia Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnia Holdings has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Omnia Holdings go up and down completely randomly.

Pair Corralation between Morgan Stanley and Omnia Holdings

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.32 times more return on investment than Omnia Holdings. However, Morgan Stanley Direct is 3.09 times less risky than Omnia Holdings. It trades about -0.06 of its potential returns per unit of risk. Omnia Holdings Limited is currently generating about -0.1 per unit of risk. If you would invest  2,074  in Morgan Stanley Direct on October 15, 2024 and sell it today you would lose (26.00) from holding Morgan Stanley Direct or give up 1.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.47%
Values	Daily Returns

Morgan Stanley Direct  vs.  Omnia Holdings Limited

Morgan Stanley Direct

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Omnia Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Omnia Holdings Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Omnia Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Morgan Stanley and Omnia Holdings

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

The idea behind Morgan Stanley Direct and Omnia Holdings Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..