Correlation Between Large Capitalization and Morgan Stanley

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

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

Diversification Opportunities for Large Capitalization and Morgan Stanley

-0.32

Correlation Coefficient

Large Capitalization  Morgan Stanley

Very good diversification

The 3 months correlation between Large and Morgan is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Large Capitalization Growth 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 Large Capitalization 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 Large Capitalization Growth 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 Large Capitalization i.e., Large Capitalization and Morgan Stanley go up and down completely randomly.

Pair Corralation between Large Capitalization and Morgan Stanley

Assuming the 90 days horizon Large Capitalization Growth is expected to generate 11.42 times more return on investment than Morgan Stanley. However, Large Capitalization is 11.42 times more volatile than Morgan Stanley Institutional. It trades about 0.07 of its potential returns per unit of risk. Morgan Stanley Institutional is currently generating about 0.13 per unit of risk. If you would invest  448.00  in Large Capitalization Growth on May 2, 2025 and sell it today you would earn a total of  131.00  from holding Large Capitalization Growth or generate 29.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.97%
Values	Daily Returns

Large Capitalization Growth  vs.  Morgan Stanley Institutional

Large Capitalization

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Large Capitalization Growth are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Large Capitalization showed solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley Insti

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Institutional has generated negative risk-adjusted returns adding no value to fund investors. 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 Large Capitalization and Morgan Stanley

The main advantage of trading using opposite Large Capitalization and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Capitalization 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 Large Capitalization Growth 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..