Correlation Between Morgan Stanley and State Street
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and State Street 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 State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and State Street Corp, you can compare the effects of market volatilities on Morgan Stanley and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and State Street.
Diversification Opportunities for Morgan Stanley and State Street
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morgan and State is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Corp has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and State Street go up and down completely randomly.
Pair Corralation between Morgan Stanley and State Street
Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.79 times more return on investment than State Street. However, Morgan Stanley is 1.79 times more volatile than State Street Corp. It trades about 0.19 of its potential returns per unit of risk. State Street Corp is currently generating about 0.18 per unit of risk. If you would invest 10,280 in Morgan Stanley on August 30, 2024 and sell it today you would earn a total of 2,841 from holding Morgan Stanley or generate 27.64% 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. State Street Corp
Performance |
| Timeline |
| Morgan Stanley |
| State Street Corp |
Morgan Stanley and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and State Street
The main advantage of trading using opposite Morgan Stanley and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Morgan Stanley vs. Goldman Sachs Group | Morgan Stanley vs. Riot Blockchain | Morgan Stanley vs. Marathon Digital Holdings | Morgan Stanley vs. Applied Blockchain |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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