Correlation Between Morgan Stanley and SLM Corp
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and SLM Corp 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 SLM Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and SLM Corp, you can compare the effects of market volatilities on Morgan Stanley and SLM Corp 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 SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and SLM Corp.
Diversification Opportunities for Morgan Stanley and SLM Corp
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morgan and SLM is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and SLM Corp go up and down completely randomly.
Pair Corralation between Morgan Stanley and SLM Corp
Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.02 times less return on investment than SLM Corp. But when comparing it to its historical volatility, Morgan Stanley is 1.14 times less risky than SLM Corp. It trades about 0.1 of its potential returns per unit of risk. SLM Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,599 in SLM Corp on August 27, 2024 and sell it today you would earn a total of 1,114 from holding SLM Corp or generate 69.67% 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. SLM Corp
Performance |
| Timeline |
| Morgan Stanley |
| SLM Corp |
Morgan Stanley and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and SLM Corp
The main advantage of trading using opposite Morgan Stanley and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, SLM Corp 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 SLM Corp will offset losses from the drop in SLM Corp's long position.| Morgan Stanley vs. Visa Class A | Morgan Stanley vs. Diamond Hill Investment | Morgan Stanley vs. Distoken Acquisition | Morgan Stanley vs. AllianceBernstein Holding LP |
| SLM Corp vs. Orix Corp Ads | SLM Corp vs. FirstCash | SLM Corp vs. Medallion Financial Corp | SLM Corp vs. Oportun Financial Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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