Correlation Between Morgan Stanley and Brighthouse Financial
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Brighthouse Financial 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 Brighthouse Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and Brighthouse Financial, you can compare the effects of market volatilities on Morgan Stanley and Brighthouse Financial 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 Brighthouse Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Brighthouse Financial.
Diversification Opportunities for Morgan Stanley and Brighthouse Financial
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morgan and Brighthouse is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial 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 Brighthouse Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brighthouse Financial has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Brighthouse Financial go up and down completely randomly.
Pair Corralation between Morgan Stanley and Brighthouse Financial
Assuming the 90 days horizon Morgan Stanley is expected to generate 0.66 times more return on investment than Brighthouse Financial. However, Morgan Stanley is 1.5 times less risky than Brighthouse Financial. It trades about 0.04 of its potential returns per unit of risk. Brighthouse Financial is currently generating about 0.02 per unit of risk. If you would invest 1,630 in Morgan Stanley on August 28, 2024 and sell it today you would earn a total of 311.00 from holding Morgan Stanley or generate 19.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley vs. Brighthouse Financial
Performance |
| Timeline |
| Morgan Stanley |
| Brighthouse Financial |
Morgan Stanley and Brighthouse Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Brighthouse Financial
The main advantage of trading using opposite Morgan Stanley and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Brighthouse Financial 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 Brighthouse Financial will offset losses from the drop in Brighthouse Financial's long position.| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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