Correlation Between Morgan Stanley and Goldman Sachs

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

Diversification Opportunities for Morgan Stanley and Goldman Sachs

0.07

Correlation Coefficient

Morgan Stanley  Goldman Sachs

Significant diversification

The 3 months correlation between Morgan and Goldman is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Goldman Sachs Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Asia 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Asia has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Goldman Sachs go up and down completely randomly.

Pair Corralation between Morgan Stanley and Goldman Sachs

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.04 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Morgan Stanley Direct is 2.48 times less risky than Goldman Sachs. It trades about 0.14 of its potential returns per unit of risk. Goldman Sachs Asia is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,876  in Goldman Sachs Asia on September 16, 2024 and sell it today you would earn a total of  312.00  from holding Goldman Sachs Asia or generate 16.63% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Goldman Sachs Asia

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 unfluctuating fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goldman Sachs Asia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Asia are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Goldman Sachs

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

The idea behind Morgan Stanley Direct and Goldman Sachs Asia 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 Anywhere module to track or share privately all of your investments from the convenience of any device.