Correlation Between Stifel Financial and Morgan Stanley

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

By analyzing existing cross correlation between Stifel Financial Corp and Morgan Stanley, you can compare the effects of market volatilities on Stifel Financial and Morgan Stanley 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 Stifel Financial with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stifel Financial and Morgan Stanley.

Diversification Opportunities for Stifel Financial and Morgan Stanley

0.25

Correlation Coefficient

Stifel Financial  Morgan Stanley

Modest diversification

The 3 months correlation between Stifel and Morgan is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Stifel Financial Corp and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Stifel Financial 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 Stifel Financial Corp are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Stifel Financial i.e., Stifel Financial and Morgan Stanley go up and down completely randomly.

Pair Corralation between Stifel Financial and Morgan Stanley

Assuming the 90 days horizon Stifel Financial is expected to generate 1.54 times less return on investment than Morgan Stanley. In addition to that, Stifel Financial is 2.26 times more volatile than Morgan Stanley. It trades about 0.08 of its total potential returns per unit of risk. Morgan Stanley is currently generating about 0.29 per unit of volatility. If you would invest  2,184  in Morgan Stanley on September 2, 2024 and sell it today you would earn a total of  215.00  from holding Morgan Stanley or generate 9.84% return on investment over 90 days.

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

Stifel Financial Corp  vs.  Morgan Stanley

Stifel Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Stifel Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Morgan Stanley

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stifel Financial and Morgan Stanley

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

The idea behind Stifel Financial Corp and Morgan Stanley 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.