Correlation Between Morgan Stanley and Shoprite Holdings

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

Diversification Opportunities for Morgan Stanley and Shoprite Holdings

0.8

Correlation Coefficient

Morgan Stanley  Shoprite Holdings

Very poor diversification

The 3 months correlation between Morgan and Shoprite is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Shoprite Holdings go up and down completely randomly.

Pair Corralation between Morgan Stanley and Shoprite Holdings

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.15 times less return on investment than Shoprite Holdings. In addition to that, Morgan Stanley is 1.07 times more volatile than Shoprite Holdings Limited. It trades about 0.03 of its total potential returns per unit of risk. Shoprite Holdings Limited is currently generating about 0.07 per unit of volatility. If you would invest  1,456  in Shoprite Holdings Limited on September 24, 2024 and sell it today you would earn a total of  177.00  from holding Shoprite Holdings Limited or generate 12.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	49.57%
Values	Daily Returns

Morgan Stanley Direct  vs.  Shoprite Holdings Limited

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.

Shoprite Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Shoprite Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Shoprite Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Shoprite Holdings

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

The idea behind Morgan Stanley Direct and Shoprite Holdings Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..