Correlation Between Morgan Stanley and Pan Asia

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

Diversification Opportunities for Morgan Stanley and Pan Asia

-0.62

Correlation Coefficient

Morgan Stanley  Pan Asia

Excellent diversification

The 3 months correlation between Morgan and Pan is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Pan Asia Footwear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Asia Footwear 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 Pan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Asia Footwear has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Pan Asia go up and down completely randomly.

Pair Corralation between Morgan Stanley and Pan Asia

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Pan Asia. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 74.37 times less risky than Pan Asia. The stock trades about -0.03 of its potential returns per unit of risk. The Pan Asia Footwear is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Pan Asia Footwear on October 7, 2024 and sell it today you would lose (22.00) from holding Pan Asia Footwear or give up 18.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.03%
Values	Daily Returns

Morgan Stanley Direct  vs.  Pan Asia Footwear

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.

Pan Asia Footwear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan Asia Footwear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Morgan Stanley and Pan Asia

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

The idea behind Morgan Stanley Direct and Pan Asia Footwear 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.