Correlation Between Morgan Stanley and AIM ETF

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

Diversification Opportunities for Morgan Stanley and AIM ETF

0.86

Correlation Coefficient

Morgan Stanley  AIM ETF

Very poor diversification

The 3 months correlation between Morgan and AIM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and AIM ETF Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIM ETF Products 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 AIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIM ETF Products has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and AIM ETF go up and down completely randomly.

Pair Corralation between Morgan Stanley and AIM ETF

Given the investment horizon of 90 days Morgan Stanley is expected to generate 113.81 times less return on investment than AIM ETF. But when comparing it to its historical volatility, Morgan Stanley Direct is 46.9 times less risky than AIM ETF. It trades about 0.03 of its potential returns per unit of risk. AIM ETF Products is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.01  in AIM ETF Products on September 20, 2024 and sell it today you would earn a total of  2,653  from holding AIM ETF Products or generate 2.65299E7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	73.8%
Values	Daily Returns

Morgan Stanley Direct  vs.  AIM ETF Products

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 fragile fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AIM ETF Products

Risk-Adjusted Performance

6 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AIM ETF Products are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AIM ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Morgan Stanley and AIM ETF

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

The idea behind Morgan Stanley Direct and AIM ETF Products 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.