Correlation Between Jefferies Financial and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Jefferies 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 Jefferies 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 Jefferies Financial Group and Morgan Stanley, you can compare the effects of market volatilities on Jefferies 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 Jefferies Financial with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jefferies Financial and Morgan Stanley.
Diversification Opportunities for Jefferies Financial and Morgan Stanley
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jefferies and Morgan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Jefferies Financial Group and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Jefferies 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 Jefferies Financial Group 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 Jefferies Financial i.e., Jefferies Financial and Morgan Stanley go up and down completely randomly.
Pair Corralation between Jefferies Financial and Morgan Stanley
Considering the 90-day investment horizon Jefferies Financial Group is expected to generate 22.55 times more return on investment than Morgan Stanley. However, Jefferies Financial is 22.55 times more volatile than Morgan Stanley. It trades about 0.38 of its potential returns per unit of risk. Morgan Stanley is currently generating about -0.11 per unit of risk. If you would invest 6,463 in Jefferies Financial Group on August 27, 2024 and sell it today you would earn a total of 1,485 from holding Jefferies Financial Group or generate 22.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jefferies Financial Group vs. Morgan Stanley
Performance |
| Timeline |
| Jefferies Financial |
| Morgan Stanley |
Jefferies Financial and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jefferies Financial and Morgan Stanley
The main advantage of trading using opposite Jefferies Financial and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jefferies 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.| Jefferies Financial vs. Lazard | Jefferies Financial vs. PJT Partners | Jefferies Financial vs. Moelis Co | Jefferies Financial vs. Houlihan Lokey |
| Morgan Stanley vs. Morgan Stanley | Morgan Stanley vs. Morgan Stanley | Morgan Stanley vs. The Goldman Sachs | Morgan Stanley vs. SCE Trust IV |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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