Correlation Between Merchants Bancorp and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Merchants Bancorp 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 Merchants Bancorp and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merchants Bancorp and Morgan Stanley, you can compare the effects of market volatilities on Merchants Bancorp 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 Merchants Bancorp with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and Morgan Stanley.
Diversification Opportunities for Merchants Bancorp and Morgan Stanley
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merchants and Morgan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Merchants Bancorp 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 Merchants Bancorp 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 Merchants Bancorp i.e., Merchants Bancorp and Morgan Stanley go up and down completely randomly.
Pair Corralation between Merchants Bancorp and Morgan Stanley
Given the investment horizon of 90 days Merchants Bancorp is expected to under-perform the Morgan Stanley. But the stock apears to be less risky and, when comparing its historical volatility, Merchants Bancorp is 1.35 times less risky than Morgan Stanley. The stock trades about -0.22 of its potential returns per unit of risk. The Morgan Stanley is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 12,858 in Morgan Stanley on October 9, 2024 and sell it today you would earn a total of 6.00 from holding Morgan Stanley or generate 0.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merchants Bancorp vs. Morgan Stanley
Performance |
| Timeline |
| Merchants Bancorp |
| Morgan Stanley |
Merchants Bancorp and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merchants Bancorp and Morgan Stanley
The main advantage of trading using opposite Merchants Bancorp and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Bancorp 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.| Merchants Bancorp vs. RBB Bancorp | Merchants Bancorp vs. Midland States Bancorp | Merchants Bancorp vs. SmartFinancial, | Merchants Bancorp vs. Business First Bancshares |
| Morgan Stanley vs. Goldman Sachs Group | Morgan Stanley vs. Riot Blockchain | Morgan Stanley vs. Marathon Digital Holdings | Morgan Stanley vs. Applied Digital |
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 CEOs Directory module to screen CEOs from public companies around the world.
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