Correlation Between Us Government and Morgan Stanley

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

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

Diversification Opportunities for Us Government and Morgan Stanley

0.07

Correlation Coefficient

Us Government  Morgan Stanley

Significant diversification

The 3 months correlation between RGVCX and Morgan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Morgan Stanley go up and down completely randomly.

Pair Corralation between Us Government and Morgan Stanley

Assuming the 90 days horizon Us Government is expected to generate 1.05 times less return on investment than Morgan Stanley. In addition to that, Us Government is 2.63 times more volatile than Morgan Stanley Institutional. It trades about 0.05 of its total potential returns per unit of risk. Morgan Stanley Institutional is currently generating about 0.13 per unit of volatility. If you would invest  99.00  in Morgan Stanley Institutional on April 20, 2025 and sell it today you would earn a total of  1.00  from holding Morgan Stanley Institutional or generate 1.01% return on investment over 90 days.

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

Us Government Securities  vs.  Morgan Stanley Institutional

Us Government Securities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Us Government 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Institutional are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Us Government and Morgan Stanley

The main advantage of trading using opposite Us Government and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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 Us Government Securities and Morgan Stanley Institutional 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.