Correlation Between Vanguard Long-term and Morgan Stanley

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

By analyzing existing cross correlation between Vanguard Long Term Treasury and Morgan Stanley Government, you can compare the effects of market volatilities on Vanguard Long-term 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 Vanguard Long-term with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long-term and Morgan Stanley.

Diversification Opportunities for Vanguard Long-term and Morgan Stanley

0.96

Correlation Coefficient

Vanguard Long-term  Morgan Stanley

Almost no diversification

The 3 months correlation between Vanguard and Morgan is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Treasury and Morgan Stanley Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Government and Vanguard Long-term 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 Vanguard Long Term Treasury 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 Government has no effect on the direction of Vanguard Long-term i.e., Vanguard Long-term and Morgan Stanley go up and down completely randomly.

Pair Corralation between Vanguard Long-term and Morgan Stanley

Assuming the 90 days horizon Vanguard Long-term is expected to generate 3.04 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Vanguard Long Term Treasury is 1.25 times less risky than Morgan Stanley. It trades about 0.05 of its potential returns per unit of risk. Morgan Stanley Government is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  645.00  in Morgan Stanley Government on December 29, 2024 and sell it today you would earn a total of  45.00  from holding Morgan Stanley Government or generate 6.98% return on investment over 90 days.

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

Vanguard Long Term Treasury  vs.  Morgan Stanley Government

Vanguard Long Term

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Long Term Treasury are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Long-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Morgan Stanley Government

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Government are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Long-term and Morgan Stanley

The main advantage of trading using opposite Vanguard Long-term and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Long-term 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 Vanguard Long Term Treasury and Morgan Stanley Government 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.