Correlation Between Morgan Stanley and Peninsula Energy

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

Diversification Opportunities for Morgan Stanley and Peninsula Energy

0.35

Correlation Coefficient

Morgan Stanley  Peninsula Energy

Weak diversification

The 3 months correlation between Morgan and Peninsula is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Peninsula Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy 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 Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Peninsula Energy go up and down completely randomly.

Pair Corralation between Morgan Stanley and Peninsula Energy

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.16 times more return on investment than Peninsula Energy. However, Morgan Stanley Direct is 6.34 times less risky than Peninsula Energy. It trades about 0.0 of its potential returns per unit of risk. Peninsula Energy Limited is currently generating about -0.09 per unit of risk. If you would invest  2,052  in Morgan Stanley Direct on December 5, 2024 and sell it today you would lose (11.00) from holding Morgan Stanley Direct or give up 0.54% of portfolio value over 90 days.

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

Morgan Stanley Direct  vs.  Peninsula Energy Limited

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Peninsula Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peninsula Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Morgan Stanley and Peninsula Energy

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

The idea behind Morgan Stanley Direct and Peninsula Energy 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.