Correlation Between Morgan Stanley and STRAX

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

Diversification Opportunities for Morgan Stanley and STRAX

0.42

Correlation Coefficient

Morgan Stanley  STRAX

Very weak diversification

The 3 months correlation between Morgan and STRAX is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and STRAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAX 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 STRAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAX has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and STRAX go up and down completely randomly.

Pair Corralation between Morgan Stanley and STRAX

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.17 times more return on investment than STRAX. However, Morgan Stanley Direct is 6.0 times less risky than STRAX. It trades about 0.04 of its potential returns per unit of risk. STRAX is currently generating about -0.12 per unit of risk. If you would invest  2,027  in Morgan Stanley Direct on December 23, 2024 and sell it today you would earn a total of  46.00  from holding Morgan Stanley Direct or generate 2.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.85%
Values	Daily Returns

Morgan Stanley Direct  vs.  STRAX

Morgan Stanley Direct

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

STRAX

Risk-Adjusted Performance

Very Weak

Over the last 90 days STRAX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for STRAX shareholders.

Pair Trading with Morgan Stanley and STRAX

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

The idea behind Morgan Stanley Direct and STRAX 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.