Correlation Between Morgan Stanley and GENERAL

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

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

Diversification Opportunities for Morgan Stanley and GENERAL

0.7

Correlation Coefficient

Morgan Stanley  GENERAL

Poor diversification

The 3 months correlation between Morgan and GENERAL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and GENERAL go up and down completely randomly.

Pair Corralation between Morgan Stanley and GENERAL

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.45 times more return on investment than GENERAL. However, Morgan Stanley is 1.45 times more volatile than GENERAL ELEC CAP. It trades about 0.13 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.0 per unit of risk. If you would invest  9,542  in Morgan Stanley on September 15, 2024 and sell it today you would earn a total of  3,198  from holding Morgan Stanley or generate 33.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	40.48%
Values	Daily Returns

Morgan Stanley  vs.  GENERAL ELEC CAP

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.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for GENERAL ELEC CAP investors.

Pair Trading with Morgan Stanley and GENERAL

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

The idea behind Morgan Stanley and GENERAL ELEC CAP 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 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.