Correlation Between Midcap Fund and Morgan Stanley

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

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

Diversification Opportunities for Midcap Fund and Morgan Stanley

0.3

Correlation Coefficient

Midcap Fund  Morgan Stanley

Weak diversification

The 3 months correlation between Midcap and Morgan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and Morgan Stanley Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Multi and Midcap Fund 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 Midcap Fund Institutional 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 Multi has no effect on the direction of Midcap Fund i.e., Midcap Fund and Morgan Stanley go up and down completely randomly.

Pair Corralation between Midcap Fund and Morgan Stanley

Assuming the 90 days horizon Midcap Fund Institutional is expected to under-perform the Morgan Stanley. But the mutual fund apears to be less risky and, when comparing its historical volatility, Midcap Fund Institutional is 1.93 times less risky than Morgan Stanley. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Morgan Stanley Multi is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,993  in Morgan Stanley Multi on November 28, 2024 and sell it today you would lose (172.00) from holding Morgan Stanley Multi or give up 3.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Midcap Fund Institutional  vs.  Morgan Stanley Multi

Midcap Fund Institutional

Risk-Adjusted Performance

Very Weak

Over the last 90 days Midcap Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Morgan Stanley Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Multi has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Midcap Fund and Morgan Stanley

The main advantage of trading using opposite Midcap Fund and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Fund 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 Midcap Fund Institutional and Morgan Stanley Multi 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.