Correlation Between Morgan Stanley and American High

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

Diversification Opportunities for Morgan Stanley and American High

0.79

Correlation Coefficient

Morgan Stanley  American High

Poor diversification

The 3 months correlation between Morgan and American is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and American High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American High Income 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 American High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American High Income has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and American High go up and down completely randomly.

Pair Corralation between Morgan Stanley and American High

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 5.02 times more return on investment than American High. However, Morgan Stanley is 5.02 times more volatile than American High Income. It trades about 0.15 of its potential returns per unit of risk. American High Income is currently generating about 0.13 per unit of risk. If you would invest  1,948  in Morgan Stanley Direct on October 20, 2024 and sell it today you would earn a total of  195.00  from holding Morgan Stanley Direct or generate 10.01% 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.  American High Income

Morgan Stanley Direct

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in February 2025.

American High Income

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American High Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American High 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 American High

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

The idea behind Morgan Stanley Direct and American High Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.