Correlation Between The9 and Morgan Stanley

Can any of the company-specific risk be diversified away by investing in both The9 and Morgan Stanley 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 The9 and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The9 Ltd ADR and Morgan Stanley ETF, you can compare the effects of market volatilities on The9 and Morgan Stanley 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 The9 with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and Morgan Stanley.

Diversification Opportunities for The9 and Morgan Stanley

0.83

Correlation Coefficient

The9  Morgan Stanley

Very poor diversification

The 3 months correlation between The9 and Morgan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and The9 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 The9 Ltd ADR are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley ETF has no effect on the direction of The9 i.e., The9 and Morgan Stanley go up and down completely randomly.

Pair Corralation between The9 and Morgan Stanley

Given the investment horizon of 90 days The9 Ltd ADR is expected to generate 6.55 times more return on investment than Morgan Stanley. However, The9 is 6.55 times more volatile than Morgan Stanley ETF. It trades about 0.26 of its potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.23 per unit of risk. If you would invest  702.00  in The9 Ltd ADR on September 5, 2024 and sell it today you would earn a total of  753.00  from holding The9 Ltd ADR or generate 107.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

The9 Ltd ADR  vs.  Morgan Stanley ETF

The9 Ltd ADR

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The9 Ltd ADR are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, The9 showed solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley ETF

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley ETF are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with The9 and Morgan Stanley

The main advantage of trading using opposite The9 and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 position performs unexpectedly, Morgan Stanley 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 Morgan Stanley will offset losses from the drop in Morgan Stanley's long position.

The idea behind The9 Ltd ADR and Morgan Stanley ETF 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 CEOs Directory module to screen CEOs from public companies around the world.