Correlation Between International Fixed and Morgan Stanley

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

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

Diversification Opportunities for International Fixed and Morgan Stanley

-0.5

Correlation Coefficient

International Fixed  Morgan Stanley

Very good diversification

The 3 months correlation between International and Morgan is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding International Fixed Income and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and International Fixed 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 International Fixed Income 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 International Fixed i.e., International Fixed and Morgan Stanley go up and down completely randomly.

Pair Corralation between International Fixed and Morgan Stanley

Assuming the 90 days horizon International Fixed is expected to generate 9.83 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, International Fixed Income is 6.41 times less risky than Morgan Stanley. It trades about 0.07 of its potential returns per unit of risk. Morgan Stanley Institutional is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  774.00  in Morgan Stanley Institutional on September 20, 2024 and sell it today you would earn a total of  983.00  from holding Morgan Stanley Institutional or generate 127.0% return on investment over 90 days.

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

International Fixed Income  vs.  Morgan Stanley Institutional

International Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, International Fixed 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

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Institutional are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Fixed and Morgan Stanley

The main advantage of trading using opposite International Fixed and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Fixed 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 International Fixed Income and Morgan Stanley Institutional 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.