Correlation Between Western Asset and Morgan Stanley

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

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

Diversification Opportunities for Western Asset and Morgan Stanley

-0.36

Correlation Coefficient

Western Asset  Morgan Stanley

Very good diversification

The 3 months correlation between Western and Morgan is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Morgan Stanley Insti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Western Asset 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 Western Asset Diversified 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 Western Asset i.e., Western Asset and Morgan Stanley go up and down completely randomly.

Pair Corralation between Western Asset and Morgan Stanley

Assuming the 90 days horizon Western Asset is expected to generate 5.73 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Western Asset Diversified is 2.71 times less risky than Morgan Stanley. It trades about 0.08 of its potential returns per unit of risk. Morgan Stanley Insti is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,597  in Morgan Stanley Insti on September 5, 2024 and sell it today you would earn a total of  71.00  from holding Morgan Stanley Insti or generate 2.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Western Asset Diversified  vs.  Morgan Stanley Insti

Western Asset Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Insti are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western Asset and Morgan Stanley

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