Correlation Between Wcm Focused and Morgan Stanley

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

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

Diversification Opportunities for Wcm Focused and Morgan Stanley

0.76

Correlation Coefficient

Wcm Focused  Morgan Stanley

Poor diversification

The 3 months correlation between Wcm and Morgan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Wcm Focused Small and Morgan Stanley Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Global and Wcm Focused 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 Wcm Focused Small 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 Global has no effect on the direction of Wcm Focused i.e., Wcm Focused and Morgan Stanley go up and down completely randomly.

Pair Corralation between Wcm Focused and Morgan Stanley

Assuming the 90 days horizon Wcm Focused Small is expected to generate 0.24 times more return on investment than Morgan Stanley. However, Wcm Focused Small is 4.15 times less risky than Morgan Stanley. It trades about -0.33 of its potential returns per unit of risk. Morgan Stanley Global is currently generating about -0.24 per unit of risk. If you would invest  1,257  in Wcm Focused Small on October 10, 2024 and sell it today you would lose (77.00) from holding Wcm Focused Small or give up 6.13% of portfolio value over 90 days.

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

Wcm Focused Small  vs.  Morgan Stanley Global

Wcm Focused Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wcm Focused Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward-looking indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Morgan Stanley Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Wcm Focused and Morgan Stanley

The main advantage of trading using opposite Wcm Focused and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wcm Focused 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 Wcm Focused Small and Morgan Stanley Global 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.