Correlation Between Morgan Stanley and Fifth Third

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

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

Diversification Opportunities for Morgan Stanley and Fifth Third

0.48

Correlation Coefficient

Morgan Stanley  Fifth Third

Very weak diversification

The 3 months correlation between Morgan and Fifth is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Fifth Third go up and down completely randomly.

Pair Corralation between Morgan Stanley and Fifth Third

Assuming the 90 days horizon Morgan Stanley is expected to under-perform the Fifth Third. But the preferred stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley is 1.38 times less risky than Fifth Third. The preferred stock trades about -0.07 of its potential returns per unit of risk. The Fifth Third Bancorp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,514  in Fifth Third Bancorp on September 25, 2024 and sell it today you would lose (7.00) from holding Fifth Third Bancorp or give up 0.28% of portfolio value over 90 days.

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

Morgan Stanley  vs.  Fifth Third Bancorp

Morgan Stanley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Fifth Third Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Fifth Third is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Morgan Stanley and Fifth Third

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

The idea behind Morgan Stanley and Fifth Third Bancorp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.