Correlation Between Morgan Stanley and Medallion Financial

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Medallion 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 Medallion 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 Medallion Financial Corp, you can compare the effects of market volatilities on Morgan Stanley and Medallion 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 Medallion Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Medallion Financial.

Diversification Opportunities for Morgan Stanley and Medallion Financial

0.93

Correlation Coefficient

Morgan Stanley  Medallion Financial

Almost no diversification

The 3 months correlation between Morgan and Medallion is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Medallion Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion 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 Medallion Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Financial Corp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Medallion Financial go up and down completely randomly.

Pair Corralation between Morgan Stanley and Medallion Financial

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.18 times less return on investment than Medallion Financial. But when comparing it to its historical volatility, Morgan Stanley is 1.25 times less risky than Medallion Financial. It trades about 0.13 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  737.00  in Medallion Financial Corp on September 17, 2024 and sell it today you would earn a total of  287.00  from holding Medallion Financial Corp or generate 38.94% return on investment over 90 days.

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

Morgan Stanley  vs.  Medallion Financial Corp

Morgan Stanley

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Medallion Financial Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Financial Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Medallion Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Medallion Financial

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

The idea behind Morgan Stanley and Medallion 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.