Correlation Between Morgan Stanley and American Express
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and American Express 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 American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and American Express, you can compare the effects of market volatilities on Morgan Stanley and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and American Express.
Diversification Opportunities for Morgan Stanley and American Express
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Morgan and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and American Express go up and down completely randomly.
Pair Corralation between Morgan Stanley and American Express
Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.07 times less return on investment than American Express. In addition to that, Morgan Stanley is 1.08 times more volatile than American Express. It trades about 0.13 of its total potential returns per unit of risk. American Express is currently generating about 0.15 per unit of volatility. If you would invest 17,899 in American Express on November 9, 2024 and sell it today you would earn a total of 14,116 from holding American Express or generate 78.86% 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. American Express
Performance |
| Timeline |
| Morgan Stanley |
| American Express |
Morgan Stanley and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and American Express
The main advantage of trading using opposite Morgan Stanley and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.| Morgan Stanley vs. Goldman Sachs Group | Morgan Stanley vs. Riot Blockchain | Morgan Stanley vs. Marathon Digital Holdings | Morgan Stanley vs. Applied Digital |
| American Express vs. Visa Class A | American Express vs. Great Western Minerals | American Express vs. Enterprise Bancorp | American Express vs. T Rowe Price |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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