Correlation Between Merck and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Merck 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 Merck and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Morgan Stanley ETF, you can compare the effects of market volatilities on Merck 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 Merck with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Morgan Stanley.
Diversification Opportunities for Merck and Morgan Stanley
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Merck and Morgan is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and Merck 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 Merck Company 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 ETF has no effect on the direction of Merck i.e., Merck and Morgan Stanley go up and down completely randomly.
Pair Corralation between Merck and Morgan Stanley
Considering the 90-day investment horizon Merck Company is expected to under-perform the Morgan Stanley. In addition to that, Merck is 43.11 times more volatile than Morgan Stanley ETF. It trades about 0.0 of its total potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.64 per unit of volatility. If you would invest 5,048 in Morgan Stanley ETF on September 3, 2024 and sell it today you would earn a total of 20.00 from holding Morgan Stanley ETF or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Morgan Stanley ETF
Performance |
| Timeline |
| Merck Company |
| Morgan Stanley ETF |
Merck and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Morgan Stanley
The main advantage of trading using opposite Merck and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck 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.| Merck vs. Pfizer Inc | Merck vs. Johnson Johnson | Merck vs. Highway Holdings Limited | Merck vs. QCR Holdings |
| Morgan Stanley vs. SCOR PK | Morgan Stanley vs. HUMANA INC | Morgan Stanley vs. Aquagold International | Morgan Stanley vs. Barloworld Ltd ADR |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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