Correlation Between Morgan Stanley and LG Electronics
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and LG Electronics 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 LG Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and LG Electronics, you can compare the effects of market volatilities on Morgan Stanley and LG Electronics 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 LG Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and LG Electronics.
Diversification Opportunities for Morgan Stanley and LG Electronics
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Morgan and LGLG is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and LG Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Electronics 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 are associated (or correlated) with LG Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Electronics has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and LG Electronics go up and down completely randomly.
Pair Corralation between Morgan Stanley and LG Electronics
Assuming the 90 days horizon Morgan Stanley is expected to generate 2.2 times more return on investment than LG Electronics. However, Morgan Stanley is 2.2 times more volatile than LG Electronics. It trades about 0.21 of its potential returns per unit of risk. LG Electronics is currently generating about -0.01 per unit of risk. If you would invest 10,708 in Morgan Stanley on September 1, 2024 and sell it today you would earn a total of 1,804 from holding Morgan Stanley or generate 16.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Morgan Stanley vs. LG Electronics
Performance |
| Timeline |
| Morgan Stanley |
| LG Electronics |
Morgan Stanley and LG Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and LG Electronics
The main advantage of trading using opposite Morgan Stanley and LG Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, LG Electronics 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 LG Electronics will offset losses from the drop in LG Electronics' long position.| Morgan Stanley vs. Morgan Stanley | Morgan Stanley vs. The Goldman Sachs | Morgan Stanley vs. Superior Plus Corp | Morgan Stanley vs. NMI Holdings |
| LG Electronics vs. SCANDMEDICAL SOLDK 040 | LG Electronics vs. Merit Medical Systems | LG Electronics vs. ONWARD MEDICAL BV | LG Electronics vs. Nufarm Limited |
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 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.
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