Correlation Between Rothschild and Morgan Stanley

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

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

Diversification Opportunities for Rothschild and Morgan Stanley

-0.23

Correlation Coefficient

Rothschild  Morgan Stanley

Very good diversification

The 3 months correlation between Rothschild and Morgan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rothschild Co SCA and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Rothschild 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 Rothschild Co SCA 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 has no effect on the direction of Rothschild i.e., Rothschild and Morgan Stanley go up and down completely randomly.

Pair Corralation between Rothschild and Morgan Stanley

If you would invest  9,128  in Morgan Stanley on January 26, 2024 and sell it today you would earn a total of  257.00  from holding Morgan Stanley or generate 2.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Rothschild Co SCA  vs.  Morgan Stanley

Rothschild Co SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rothschild Co SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Rothschild is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Morgan Stanley

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Rothschild and Morgan Stanley

The main advantage of trading using opposite Rothschild and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rothschild 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 Rothschild Co SCA and Morgan Stanley 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.