Correlation Between Stone Ridge and Morgan Stanley

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

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

Diversification Opportunities for Stone Ridge and Morgan Stanley

-0.13

Correlation Coefficient

Stone Ridge  Morgan Stanley

Good diversification

The 3 months correlation between Stone and Morgan is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Morgan Stanley Insti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Stone Ridge 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 Stone Ridge Diversified 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 Insti has no effect on the direction of Stone Ridge i.e., Stone Ridge and Morgan Stanley go up and down completely randomly.

Pair Corralation between Stone Ridge and Morgan Stanley

Assuming the 90 days horizon Stone Ridge is expected to generate 1.25 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Stone Ridge Diversified is 5.3 times less risky than Morgan Stanley. It trades about 0.25 of its potential returns per unit of risk. Morgan Stanley Insti is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,967  in Morgan Stanley Insti on October 10, 2024 and sell it today you would earn a total of  637.00  from holding Morgan Stanley Insti or generate 32.38% return on investment over 90 days.

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

Stone Ridge Diversified  vs.  Morgan Stanley Insti

Stone Ridge Diversified

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge Diversified are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Morgan Stanley Insti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Insti has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential 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 Stone Ridge and Morgan Stanley

The main advantage of trading using opposite Stone Ridge and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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 Stone Ridge Diversified and Morgan Stanley Insti 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.