Correlation Between Morgan Stanley and Gold Bullion

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

Diversification Opportunities for Morgan Stanley and Gold Bullion

0.46

Correlation Coefficient

Morgan Stanley  Gold Bullion

Very weak diversification

The 3 months correlation between Morgan and Gold is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Gold Bullion Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion Securities 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 Gold Bullion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion Securities has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Gold Bullion go up and down completely randomly.

Pair Corralation between Morgan Stanley and Gold Bullion

Given the investment horizon of 90 days Morgan Stanley is expected to generate 1.85 times less return on investment than Gold Bullion. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.64 times less risky than Gold Bullion. It trades about 0.03 of its potential returns per unit of risk. Gold Bullion Securities is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,414,250  in Gold Bullion Securities on September 23, 2024 and sell it today you would earn a total of  503,200  from holding Gold Bullion Securities or generate 35.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	46.31%
Values	Daily Returns

Morgan Stanley Direct  vs.  Gold Bullion Securities

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gold Bullion Securities

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Bullion Securities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gold Bullion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Morgan Stanley and Gold Bullion

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

The idea behind Morgan Stanley Direct and Gold Bullion Securities 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 Transaction History module to view history of all your transactions and understand their impact on performance.