Correlation Between Morgan Stanley and Galapagos | MSDL vs. GLPG.AS

Correlation Between Morgan Stanley and Galapagos

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

Diversification Opportunities for Morgan Stanley and Galapagos

MorganGalapagosDiversified AwayMorganGalapagosDiversified Away100%
-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Morgan and Galapagos is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Galapagos NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galapagos NV 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 Galapagos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galapagos NV has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Galapagos go up and down completely randomly.

Pair Corralation between Morgan Stanley and Galapagos

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.55 times more return on investment than Galapagos. However, Morgan Stanley Direct is 1.81 times less risky than Galapagos. It trades about 0.08 of its potential returns per unit of risk. Galapagos NV is currently generating about -0.1 per unit of risk. If you would invest  1,995  in Morgan Stanley Direct on September 21, 2024 and sell it today you would earn a total of  69.00  from holding Morgan Stanley Direct or generate 3.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.56%
ValuesDaily Returns

Morgan Stanley Direct  vs.  Galapagos NV

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-50510
JavaScript chart by amCharts 3.21.15MSDL GLPG
       Timeline  
Morgan Stanley Direct 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec19.52020.52121.5
Galapagos NV 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Galapagos NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Galapagos is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2425262728

Morgan Stanley and Galapagos Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.05-2.28-1.52-0.750.00.791.592.393.19 0.10.20.30.4
JavaScript chart by amCharts 3.21.15MSDL GLPG
       Returns  

Pair Trading with Morgan Stanley and Galapagos

The main advantage of trading using opposite Morgan Stanley and Galapagos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Galapagos 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 Galapagos will offset losses from the drop in Galapagos' long position.
The idea behind Morgan Stanley Direct and Galapagos NV 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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