Correlation Between Morgan Stanley and Sky Petroleum

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

Diversification Opportunities for Morgan Stanley and Sky Petroleum

-0.02

Correlation Coefficient

Morgan Stanley  Sky Petroleum

Good diversification

The 3 months correlation between Morgan and Sky is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Sky Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Petroleum 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 Sky Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Petroleum has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Sky Petroleum go up and down completely randomly.

Pair Corralation between Morgan Stanley and Sky Petroleum

Given the investment horizon of 90 days Morgan Stanley is expected to generate 107.36 times less return on investment than Sky Petroleum. But when comparing it to its historical volatility, Morgan Stanley Direct is 42.7 times less risky than Sky Petroleum. It trades about 0.03 of its potential returns per unit of risk. Sky Petroleum is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Sky Petroleum on September 23, 2024 and sell it today you would earn a total of  0.01  from holding Sky Petroleum or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.59%
Values	Daily Returns

Morgan Stanley Direct  vs.  Sky Petroleum

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

Sky Petroleum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sky Petroleum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Sky Petroleum demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Sky Petroleum

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

The idea behind Morgan Stanley Direct and Sky Petroleum 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.

Check out your portfolio center.

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.