Correlation Between Morgan Stanley and ProShares
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and ProShares 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 ProShares 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 ProShares SP Technology, you can compare the effects of market volatilities on Morgan Stanley and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and ProShares.
Diversification Opportunities for Morgan Stanley and ProShares
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Morgan and ProShares is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and ProShares SP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Technology 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Technology has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and ProShares go up and down completely randomly.
Pair Corralation between Morgan Stanley and ProShares
Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the ProShares. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 1.07 times less risky than ProShares. The stock trades about -0.15 of its potential returns per unit of risk. The ProShares SP Technology is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 7,802 in ProShares SP Technology on December 5, 2024 and sell it today you would lose (183.00) from holding ProShares SP Technology or give up 2.35% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Morgan Stanley Direct vs. ProShares SP Technology
Performance |
Timeline |
Morgan Stanley Direct |
ProShares SP Technology |
Morgan Stanley and ProShares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Morgan Stanley and ProShares
The main advantage of trading using opposite Morgan Stanley and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, ProShares 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 ProShares will offset losses from the drop in ProShares' long position.Morgan Stanley vs. Harmony Gold Mining | Morgan Stanley vs. RTG Mining | Morgan Stanley vs. Brandywine Realty Trust | Morgan Stanley vs. PepsiCo |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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