Correlation Between GM and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Morgan Stanley Vitality, you can compare the effects of market volatilities on GM 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 GM with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Morgan Stanley.
Diversification Opportunities for GM and Morgan Stanley
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Morgan is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Morgan Stanley Vitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Vitality and GM 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 General Motors 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 Vitality has no effect on the direction of GM i.e., GM and Morgan Stanley go up and down completely randomly.
Pair Corralation between GM and Morgan Stanley
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.76 times more return on investment than Morgan Stanley. However, GM is 1.76 times more volatile than Morgan Stanley Vitality. It trades about 0.09 of its potential returns per unit of risk. Morgan Stanley Vitality is currently generating about -0.01 per unit of risk. If you would invest 3,550 in General Motors on September 14, 2024 and sell it today you would earn a total of 1,710 from holding General Motors or generate 48.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Morgan Stanley Vitality
Performance |
| Timeline |
| General Motors |
| Morgan Stanley Vitality |
GM and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Morgan Stanley
The main advantage of trading using opposite GM and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and Morgan Stanley Vitality 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.| Morgan Stanley vs. Emerging Markets Equity | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Positions Ratings 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 | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |