Correlation Between Stellar and Morgan Stanley

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

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

Diversification Opportunities for Stellar and Morgan Stanley

0.08

Correlation Coefficient

Stellar  Morgan Stanley

Significant diversification

The 3 months correlation between Stellar and Morgan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and Stellar 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 Stellar 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 ETF has no effect on the direction of Stellar i.e., Stellar and Morgan Stanley go up and down completely randomly.

Pair Corralation between Stellar and Morgan Stanley

Assuming the 90 days trading horizon Stellar is expected to generate 13.26 times more return on investment than Morgan Stanley. However, Stellar is 13.26 times more volatile than Morgan Stanley ETF. It trades about 0.11 of its potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.13 per unit of risk. If you would invest  38.00  in Stellar on October 25, 2024 and sell it today you would earn a total of  5.00  from holding Stellar or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Stellar  vs.  Morgan Stanley ETF

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Stellar and Morgan Stanley

The main advantage of trading using opposite Stellar and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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 Stellar and Morgan Stanley ETF 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.