Correlation Between Morgan Stanley and Macys

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

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

Diversification Opportunities for Morgan Stanley and Macys

0.81

Correlation Coefficient

Morgan Stanley  Macys

Very poor diversification

The 3 months correlation between Morgan and Macys is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc 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 Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Macys go up and down completely randomly.

Pair Corralation between Morgan Stanley and Macys

Assuming the 90 days trading horizon Morgan Stanley is expected to under-perform the Macys. In addition to that, Morgan Stanley is 1.12 times more volatile than Macys Inc. It trades about -0.06 of its total potential returns per unit of risk. Macys Inc is currently generating about 0.22 per unit of volatility. If you would invest  9,199  in Macys Inc on September 24, 2024 and sell it today you would earn a total of  906.00  from holding Macys Inc or generate 9.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Morgan Stanley  vs.  Macys Inc

Morgan Stanley

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Morgan Stanley sustained solid returns over the last few months and may actually be approaching a breakup point.

Macys Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Macys sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Macys

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

The idea behind Morgan Stanley and Macys Inc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.