Correlation Between Morgan Stanley and American International

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

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

Diversification Opportunities for Morgan Stanley and American International

0.4

Correlation Coefficient

Morgan Stanley  American International

Very weak diversification

The 3 months correlation between Morgan and American is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International 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 Direct are associated (or correlated) with American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and American International go up and down completely randomly.

Pair Corralation between Morgan Stanley and American International

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.76 times more return on investment than American International. However, Morgan Stanley Direct is 1.31 times less risky than American International. It trades about 0.13 of its potential returns per unit of risk. American International Group is currently generating about 0.1 per unit of risk. If you would invest  1,968  in Morgan Stanley Direct on September 29, 2024 and sell it today you would earn a total of  167.00  from holding Morgan Stanley Direct or generate 8.49% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  American International Group

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, American International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and American International

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

The idea behind Morgan Stanley Direct and American International Group 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.