Correlation Between HSBC Holdings and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings 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 HSBC Holdings and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings plc and Morgan Stanley, you can compare the effects of market volatilities on HSBC Holdings 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 HSBC Holdings with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Morgan Stanley.
Diversification Opportunities for HSBC Holdings and Morgan Stanley
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HSBC and Morgan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and HSBC Holdings 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 HSBC Holdings plc 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 HSBC Holdings i.e., HSBC Holdings and Morgan Stanley go up and down completely randomly.
Pair Corralation between HSBC Holdings and Morgan Stanley
Assuming the 90 days trading horizon HSBC Holdings is expected to generate 1.63 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, HSBC Holdings plc is 1.04 times less risky than Morgan Stanley. It trades about 0.1 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 202,152 in Morgan Stanley on November 2, 2024 and sell it today you would earn a total of 82,848 from holding Morgan Stanley or generate 40.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings plc vs. Morgan Stanley
Performance |
| Timeline |
| HSBC Holdings plc |
| Morgan Stanley |
HSBC Holdings and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Morgan Stanley
The main advantage of trading using opposite HSBC Holdings and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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.| HSBC Holdings vs. Capital One Financial | HSBC Holdings vs. Southern Copper | HSBC Holdings vs. Prudential Financial | HSBC Holdings vs. Lloyds Banking Group |
| Morgan Stanley vs. The Charles Schwab | Morgan Stanley vs. The Goldman Sachs | Morgan Stanley vs. Value Grupo Financiero | Morgan Stanley vs. Corporativo GBM SAB |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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