Correlation Between Morgan Stanley and SEI Exchange

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

Diversification Opportunities for Morgan Stanley and SEI Exchange

0.89

Correlation Coefficient

Morgan Stanley  SEI Exchange

Very poor diversification

The 3 months correlation between Morgan and SEI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and SEI Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Exchange Traded 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 SEI Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Exchange Traded has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and SEI Exchange go up and down completely randomly.

Pair Corralation between Morgan Stanley and SEI Exchange

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.07 times less return on investment than SEI Exchange. In addition to that, Morgan Stanley is 1.78 times more volatile than SEI Exchange Traded. It trades about 0.03 of its total potential returns per unit of risk. SEI Exchange Traded is currently generating about 0.12 per unit of volatility. If you would invest  2,361  in SEI Exchange Traded on September 23, 2024 and sell it today you would earn a total of  1,564  from holding SEI Exchange Traded or generate 66.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	46.68%
Values	Daily Returns

Morgan Stanley Direct  vs.  SEI Exchange Traded

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SEI Exchange Traded

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Exchange Traded are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, SEI Exchange may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and SEI Exchange

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

The idea behind Morgan Stanley Direct and SEI Exchange Traded 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.