Correlation Between Sensient Technologies and Morgan Stanley

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

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

Diversification Opportunities for Sensient Technologies and Morgan Stanley

-0.17

Correlation Coefficient

Sensient Technologies  Morgan Stanley

Good diversification

The 3 months correlation between Sensient and Morgan is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Morgan Stanley Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Direct and Sensient Technologies 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 Sensient Technologies 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 Direct has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Morgan Stanley go up and down completely randomly.

Pair Corralation between Sensient Technologies and Morgan Stanley

Considering the 90-day investment horizon Sensient Technologies is expected to generate 2.01 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Sensient Technologies is 1.01 times less risky than Morgan Stanley. It trades about 0.02 of its potential returns per unit of risk. Morgan Stanley Direct is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,907  in Morgan Stanley Direct on September 26, 2024 and sell it today you would earn a total of  194.00  from holding Morgan Stanley Direct or generate 10.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.98%
Values	Daily Returns

Sensient Technologies  vs.  Morgan Stanley Direct

Sensient Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sensient Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

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.

Pair Trading with Sensient Technologies and Morgan Stanley

The main advantage of trading using opposite Sensient Technologies and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies 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 Sensient Technologies and Morgan Stanley Direct 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.