Correlation Between Nike and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Nike and Morgan Stanley 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 Nike and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Morgan Stanley, you can compare the effects of market volatilities on Nike and Morgan Stanley 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 Nike with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Morgan Stanley.
Diversification Opportunities for Nike and Morgan Stanley
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nike and Morgan is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Nike 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 Nike Inc are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Nike i.e., Nike and Morgan Stanley go up and down completely randomly.
Pair Corralation between Nike and Morgan Stanley
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Morgan Stanley. In addition to that, Nike is 1.2 times more volatile than Morgan Stanley. It trades about -0.02 of its total potential returns per unit of risk. Morgan Stanley is currently generating about 0.06 per unit of volatility. If you would invest 8,311 in Morgan Stanley on August 30, 2024 and sell it today you would earn a total of 4,810 from holding Morgan Stanley or generate 57.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Morgan Stanley
Performance |
| Timeline |
| Nike Inc |
| Morgan Stanley |
Nike and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Morgan Stanley
The main advantage of trading using opposite Nike and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Morgan Stanley 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 Morgan Stanley will offset losses from the drop in Morgan Stanley's long position.The idea behind Nike Inc and Morgan Stanley 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.| Morgan Stanley vs. Goldman Sachs Group | Morgan Stanley vs. Riot Blockchain | Morgan Stanley vs. Marathon Digital Holdings | Morgan Stanley vs. Applied Blockchain |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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