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 and The Goldman Sachs, 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
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Morgan and Goldman is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 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 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 is expected to generate 2.82 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Morgan Stanley is 3.04 times less risky than Goldman Sachs. It trades about 0.1 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,681 in The Goldman Sachs on August 24, 2024 and sell it today you would earn a total of 742.00 from holding The Goldman Sachs or generate 44.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley vs. The Goldman Sachs
Performance |
| Timeline |
| Morgan Stanley |
| Goldman Sachs |
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. Morgan Stanley | Morgan Stanley vs. Morgan Stanley | Morgan Stanley vs. The Goldman Sachs | Morgan Stanley vs. Morgan Stanley |
| Goldman Sachs vs. Morgan Stanley | Goldman Sachs vs. Morgan Stanley | Goldman Sachs vs. Morgan Stanley | Goldman Sachs vs. Morgan Stanley |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |