Correlation Between Morgan Stanley and Harbor SMID

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

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

Diversification Opportunities for Morgan Stanley and Harbor SMID

0.84

Correlation Coefficient

Morgan Stanley  Harbor SMID

Very poor diversification

The 3 months correlation between Morgan and Harbor is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Pathway and Harbor SMID Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor SMID Cap and Morgan Stanley 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 Morgan Stanley Pathway are associated (or correlated) with Harbor SMID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor SMID Cap has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Harbor SMID go up and down completely randomly.

Pair Corralation between Morgan Stanley and Harbor SMID

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.05 times less return on investment than Harbor SMID. But when comparing it to its historical volatility, Morgan Stanley Pathway is 1.1 times less risky than Harbor SMID. It trades about 0.14 of its potential returns per unit of risk. Harbor SMID Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,026  in Harbor SMID Cap on May 5, 2025 and sell it today you would earn a total of  192.00  from holding Harbor SMID Cap or generate 9.48% return on investment over 90 days.

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

Morgan Stanley Pathway  vs.  Harbor SMID Cap

Morgan Stanley Pathway

Risk-Adjusted Performance

OK

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

Harbor SMID Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor SMID Cap are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Harbor SMID may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Morgan Stanley and Harbor SMID

The main advantage of trading using opposite Morgan Stanley and Harbor SMID positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Harbor SMID 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 Harbor SMID will offset losses from the drop in Harbor SMID's long position.

The idea behind Morgan Stanley Pathway and Harbor SMID Cap 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.