Correlation Between Morgan Stanley and IShares ESG

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

Diversification Opportunities for Morgan Stanley and IShares ESG

-0.15

Correlation Coefficient

Morgan Stanley  IShares ESG

Good diversification

The 3 months correlation between Morgan and IShares is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and IShares ESG go up and down completely randomly.

Pair Corralation between Morgan Stanley and IShares ESG

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.13 times less return on investment than IShares ESG. In addition to that, Morgan Stanley is 2.39 times more volatile than iShares ESG Advanced. It trades about 0.04 of its total potential returns per unit of risk. iShares ESG Advanced is currently generating about 0.1 per unit of volatility. If you would invest  5,070  in iShares ESG Advanced on September 14, 2024 and sell it today you would earn a total of  967.00  from holding iShares ESG Advanced or generate 19.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.01%
Values	Daily Returns

Morgan Stanley Direct  vs.  iShares ESG Advanced

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

Good

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 weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares ESG Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG Advanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and IShares ESG

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

The idea behind Morgan Stanley Direct and iShares ESG Advanced 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.