Correlation Between Morgan Stanley and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Goldman Sachs 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 Morgan Stanley and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley Global and Goldman Sachs Clean, you can compare the effects of market volatilities on Morgan Stanley and Goldman Sachs 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 Morgan Stanley with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Goldman Sachs.
Diversification Opportunities for Morgan Stanley and Goldman Sachs
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Morgan and Goldman is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Global and Goldman Sachs Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Clean and Morgan Stanley 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 Morgan Stanley Global are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Clean has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Goldman Sachs go up and down completely randomly.
Pair Corralation between Morgan Stanley and Goldman Sachs
Assuming the 90 days horizon Morgan Stanley Global is expected to generate 0.55 times more return on investment than Goldman Sachs. However, Morgan Stanley Global is 1.83 times less risky than Goldman Sachs. It trades about 0.35 of its potential returns per unit of risk. Goldman Sachs Clean is currently generating about -0.11 per unit of risk. If you would invest 1,289 in Morgan Stanley Global on September 1, 2024 and sell it today you would earn a total of 84.00 from holding Morgan Stanley Global or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley Global vs. Goldman Sachs Clean
Performance |
| Timeline |
| Morgan Stanley Global |
| Goldman Sachs Clean |
Morgan Stanley and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Goldman Sachs
The main advantage of trading using opposite Morgan Stanley and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| Morgan Stanley vs. Emerging Markets Equity | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income | Morgan Stanley vs. Global Fixed Income |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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