Correlation Between Franklin and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Franklin 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 Franklin and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Government Money and Morgan Stanley Government, you can compare the effects of market volatilities on Franklin 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 Franklin with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Morgan Stanley.
Diversification Opportunities for Franklin and Morgan Stanley
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Franklin and Morgan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Morgan Stanley Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Government and Franklin 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 Franklin Government Money 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 Government has no effect on the direction of Franklin i.e., Franklin and Morgan Stanley go up and down completely randomly.
Pair Corralation between Franklin and Morgan Stanley
Assuming the 90 days horizon Franklin is expected to generate 1.16 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Franklin Government Money is 5.77 times less risky than Morgan Stanley. It trades about 0.13 of its potential returns per unit of risk. Morgan Stanley Government is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 92.00 in Morgan Stanley Government on August 28, 2024 and sell it today you would earn a total of 8.00 from holding Morgan Stanley Government or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Franklin Government Money vs. Morgan Stanley Government
Performance |
| Timeline |
| Franklin Government Money |
| Morgan Stanley Government |
Franklin and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and Morgan Stanley
The main advantage of trading using opposite Franklin and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin 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.| Franklin vs. Aig Government Money | Franklin vs. Blackrock Government Bond | Franklin vs. John Hancock Government | Franklin vs. Dunham Porategovernment Bond |
| Morgan Stanley vs. Vanguard Total Stock | Morgan Stanley vs. Vanguard 500 Index | Morgan Stanley vs. Vanguard Total Stock | Morgan Stanley vs. Vanguard Total Stock |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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