Correlation Between Morgan Stanley and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Marathon Oil 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 Marathon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and Marathon Oil, you can compare the effects of market volatilities on Morgan Stanley and Marathon Oil 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 Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Marathon Oil.
Diversification Opportunities for Morgan Stanley and Marathon Oil
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Morgan and Marathon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil 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 Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Marathon Oil go up and down completely randomly.
Pair Corralation between Morgan Stanley and Marathon Oil
Assuming the 90 days trading horizon Morgan Stanley is expected to generate 0.81 times more return on investment than Marathon Oil. However, Morgan Stanley is 1.24 times less risky than Marathon Oil. It trades about 0.07 of its potential returns per unit of risk. Marathon Oil is currently generating about 0.02 per unit of risk. If you would invest 8,991 in Morgan Stanley on August 26, 2024 and sell it today you would earn a total of 6,673 from holding Morgan Stanley or generate 74.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 82.4% |
| Values | Daily Returns |
Morgan Stanley vs. Marathon Oil
Performance |
| Timeline |
| Morgan Stanley |
| Marathon Oil |
Morgan Stanley and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Marathon Oil
The main advantage of trading using opposite Morgan Stanley and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Marathon Oil 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.The idea behind Morgan Stanley and Marathon Oil pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Marathon Oil vs. Bemobi Mobile Tech | Marathon Oil vs. Marfrig Global Foods | Marathon Oil vs. Uber Technologies | Marathon Oil vs. Taiwan Semiconductor Manufacturing |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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