Correlation Between Morgan Stanley and Vaisala Oyj

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

Diversification Opportunities for Morgan Stanley and Vaisala Oyj

0.1

Correlation Coefficient

Morgan Stanley  Vaisala Oyj

Average diversification

The 3 months correlation between Morgan and Vaisala is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Vaisala Oyj A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaisala Oyj A 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 Vaisala Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaisala Oyj A has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Vaisala Oyj go up and down completely randomly.

Pair Corralation between Morgan Stanley and Vaisala Oyj

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.06 times less return on investment than Vaisala Oyj. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.15 times less risky than Vaisala Oyj. It trades about 0.04 of its potential returns per unit of risk. Vaisala Oyj A is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,788  in Vaisala Oyj A on September 28, 2024 and sell it today you would earn a total of  1,067  from holding Vaisala Oyj A or generate 28.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	44.85%
Values	Daily Returns

Morgan Stanley Direct  vs.  Vaisala Oyj A

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vaisala Oyj A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaisala Oyj A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Vaisala Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Morgan Stanley and Vaisala Oyj

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

The idea behind Morgan Stanley Direct and Vaisala Oyj A 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 Valuation module to check real value of public entities based on technical and fundamental data.