Correlation Between Morgan Stanley and Starbucks
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Starbucks 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 Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and Starbucks, you can compare the effects of market volatilities on Morgan Stanley and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Starbucks.
Diversification Opportunities for Morgan Stanley and Starbucks
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morgan and Starbucks is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Starbucks go up and down completely randomly.
Pair Corralation between Morgan Stanley and Starbucks
Assuming the 90 days horizon Morgan Stanley is expected to generate 0.93 times more return on investment than Starbucks. However, Morgan Stanley is 1.07 times less risky than Starbucks. It trades about 0.06 of its potential returns per unit of risk. Starbucks is currently generating about 0.02 per unit of risk. If you would invest 161,067 in Morgan Stanley on August 30, 2024 and sell it today you would earn a total of 106,433 from holding Morgan Stanley or generate 66.08% 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. Starbucks
Performance |
| Timeline |
| Morgan Stanley |
| Starbucks |
Morgan Stanley and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Starbucks
The main advantage of trading using opposite Morgan Stanley and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.| Morgan Stanley vs. The Charles Schwab | Morgan Stanley vs. The Goldman Sachs | Morgan Stanley vs. Value Grupo Financiero | Morgan Stanley vs. INVEX Controladora SAB |
| Starbucks vs. DXC Technology | Starbucks vs. Grupo Sports World | Starbucks vs. Samsung Electronics Co | Starbucks vs. Delta Air Lines |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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