Correlation Between Morgan Stanley and MetLife Preferred
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and MetLife Preferred 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 MetLife Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and MetLife Preferred Stock, you can compare the effects of market volatilities on Morgan Stanley and MetLife Preferred 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 MetLife Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and MetLife Preferred.
Diversification Opportunities for Morgan Stanley and MetLife Preferred
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Morgan and MetLife is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and MetLife Preferred Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife Preferred Stock 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 MetLife Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife Preferred Stock has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and MetLife Preferred go up and down completely randomly.
Pair Corralation between Morgan Stanley and MetLife Preferred
Assuming the 90 days horizon Morgan Stanley is expected to generate 1.28 times more return on investment than MetLife Preferred. However, Morgan Stanley is 1.28 times more volatile than MetLife Preferred Stock. It trades about 0.04 of its potential returns per unit of risk. MetLife Preferred Stock is currently generating about 0.04 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley vs. MetLife Preferred Stock
Performance |
| Timeline |
| Morgan Stanley |
| MetLife Preferred Stock |
Morgan Stanley and MetLife Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and MetLife Preferred
The main advantage of trading using opposite Morgan Stanley and MetLife Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, MetLife Preferred 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 MetLife Preferred will offset losses from the drop in MetLife Preferred'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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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