Correlation Between Morgan Stanley and VGI Public

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

Diversification Opportunities for Morgan Stanley and VGI Public

0.03

Correlation Coefficient

Morgan Stanley  VGI Public

Significant diversification

The 3 months correlation between Morgan and VGI is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and VGI Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VGI Public 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 VGI Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VGI Public has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and VGI Public go up and down completely randomly.

Pair Corralation between Morgan Stanley and VGI Public

Given the investment horizon of 90 days Morgan Stanley is expected to generate 59.1 times less return on investment than VGI Public. But when comparing it to its historical volatility, Morgan Stanley Direct is 39.46 times less risky than VGI Public. It trades about 0.04 of its potential returns per unit of risk. VGI Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  417.00  in VGI Public on September 14, 2024 and sell it today you would lose (137.00) from holding VGI Public or give up 32.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.97%
Values	Daily Returns

Morgan Stanley Direct  vs.  VGI Public

Morgan Stanley Direct

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VGI Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VGI Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, VGI Public sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and VGI Public

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

The idea behind Morgan Stanley Direct and VGI Public 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.