Correlation Between Morgan Stanley and Stifel Financial

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

By analyzing existing cross correlation between Morgan Stanley and Stifel Financial Corp, you can compare the effects of market volatilities on Morgan Stanley and Stifel Financial 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 Stifel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Stifel Financial.

Diversification Opportunities for Morgan Stanley and Stifel Financial

-0.42

Correlation Coefficient

Morgan Stanley  Stifel Financial

Very good diversification

The 3 months correlation between Morgan and Stifel is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Stifel Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial Corp 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 are associated (or correlated) with Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial Corp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Stifel Financial go up and down completely randomly.

Pair Corralation between Morgan Stanley and Stifel Financial

Assuming the 90 days horizon Morgan Stanley is expected to generate 0.63 times more return on investment than Stifel Financial. However, Morgan Stanley is 1.59 times less risky than Stifel Financial. It trades about 0.29 of its potential returns per unit of risk. Stifel Financial Corp is currently generating about 0.05 per unit of risk. If you would invest  2,184  in Morgan Stanley on September 2, 2024 and sell it today you would earn a total of  215.00  from holding Morgan Stanley or generate 9.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley  vs.  Stifel Financial Corp

Morgan Stanley

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stifel Financial Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Stifel Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Morgan Stanley and Stifel Financial

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

The idea behind Morgan Stanley and Stifel Financial Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.