Correlation Between MetLife Preferred and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both MetLife Preferred 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 MetLife Preferred and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife Preferred Stock and Morgan Stanley, you can compare the effects of market volatilities on MetLife Preferred 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 MetLife Preferred with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife Preferred and Morgan Stanley.
Diversification Opportunities for MetLife Preferred and Morgan Stanley
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MetLife and Morgan is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and MetLife Preferred 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 MetLife Preferred Stock 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 MetLife Preferred i.e., MetLife Preferred and Morgan Stanley go up and down completely randomly.
Pair Corralation between MetLife Preferred and Morgan Stanley
Assuming the 90 days trading horizon MetLife Preferred Stock is expected to under-perform the Morgan Stanley. But the preferred stock apears to be less risky and, when comparing its historical volatility, MetLife Preferred Stock is 1.19 times less risky than Morgan Stanley. The preferred stock trades about -0.18 of its potential returns per unit of risk. The Morgan Stanley is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 1,982 in Morgan Stanley on August 28, 2024 and sell it today you would lose (41.00) from holding Morgan Stanley or give up 2.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife Preferred Stock vs. Morgan Stanley
Performance |
| Timeline |
| MetLife Preferred Stock |
| Morgan Stanley |
MetLife Preferred and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife Preferred and Morgan Stanley
The main advantage of trading using opposite MetLife Preferred and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred 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 MetLife Preferred Stock and Morgan Stanley 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. Bank of America | Morgan Stanley vs. JPMorgan Chase Co | Morgan Stanley vs. Wells Fargo | Morgan Stanley vs. JPMorgan Chase Co |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| 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 | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |