Correlation Between Morgan Stanley and Russell 2000

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Russell 2000 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 Russell 2000 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 Russell 2000 2x, you can compare the effects of market volatilities on Morgan Stanley and Russell 2000 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 Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Russell 2000.

Diversification Opportunities for Morgan Stanley and Russell 2000

0.41

Correlation Coefficient

Morgan Stanley  Russell 2000

Very weak diversification

The 3 months correlation between Morgan and Russell is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Russell 2000 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 2x 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 Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 2x has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Russell 2000 go up and down completely randomly.

Pair Corralation between Morgan Stanley and Russell 2000

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.37 times more return on investment than Russell 2000. However, Morgan Stanley Direct is 2.74 times less risky than Russell 2000. It trades about 0.13 of its potential returns per unit of risk. Russell 2000 2x is currently generating about 0.01 per unit of risk. If you would invest  1,977  in Morgan Stanley Direct on October 1, 2024 and sell it today you would earn a total of  158.00  from holding Morgan Stanley Direct or generate 7.99% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Russell 2000 2x

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 January 2025.

Russell 2000 2x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Russell 2000 2x has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Russell 2000 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 Russell 2000

The main advantage of trading using opposite Morgan Stanley and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.

The idea behind Morgan Stanley Direct and Russell 2000 2x 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.