Correlation Between Morgan Stanley and First Horizon

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

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

Diversification Opportunities for Morgan Stanley and First Horizon

0.58

Correlation Coefficient

Morgan Stanley  First Horizon

Very weak diversification

The 3 months correlation between Morgan and First is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and First Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon 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 First Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Horizon has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and First Horizon go up and down completely randomly.

Pair Corralation between Morgan Stanley and First Horizon

Assuming the 90 days horizon Morgan Stanley is expected to generate 3.28 times less return on investment than First Horizon. In addition to that, Morgan Stanley is 1.47 times more volatile than First Horizon. It trades about 0.04 of its total potential returns per unit of risk. First Horizon is currently generating about 0.2 per unit of volatility. If you would invest  2,449  in First Horizon on September 4, 2024 and sell it today you would earn a total of  101.00  from holding First Horizon or generate 4.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Morgan Stanley  vs.  First Horizon

Morgan Stanley

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

First Horizon

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Horizon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and First Horizon

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

The idea behind Morgan Stanley and First Horizon 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.