Correlation Between Morgan Stanley and Visa

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

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

Diversification Opportunities for Morgan Stanley and Visa

0.9

Correlation Coefficient

Morgan Stanley  Visa

Almost no diversification

The 3 months correlation between Morgan and Visa is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Visa go up and down completely randomly.

Pair Corralation between Morgan Stanley and Visa

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.94 times more return on investment than Visa. However, Morgan Stanley is 1.94 times more volatile than Visa Class A. It trades about 0.15 of its potential returns per unit of risk. Visa Class A is currently generating about 0.22 per unit of risk. If you would invest  10,178  in Morgan Stanley on September 24, 2024 and sell it today you would earn a total of  2,166  from holding Morgan Stanley or generate 21.28% 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.  Visa Class A

Morgan Stanley

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Visa

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

The idea behind Morgan Stanley and Visa Class A 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.