Correlation Between Performance Food and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Performance Food 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 Performance Food and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and Morgan Stanley, you can compare the effects of market volatilities on Performance Food 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 Performance Food with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Morgan Stanley.
Diversification Opportunities for Performance Food and Morgan Stanley
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Performance and Morgan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Performance Food 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 Performance Food Group 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 Performance Food i.e., Performance Food and Morgan Stanley go up and down completely randomly.
Pair Corralation between Performance Food and Morgan Stanley
Assuming the 90 days trading horizon Performance Food is expected to generate 1.46 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, Performance Food Group is 2.27 times less risky than Morgan Stanley. It trades about 0.32 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 10,708 in Morgan Stanley on September 1, 2024 and sell it today you would earn a total of 1,804 from holding Morgan Stanley or generate 16.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Performance Food Group vs. Morgan Stanley
Performance |
| Timeline |
| Performance Food |
| Morgan Stanley |
Performance Food and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and Morgan Stanley
The main advantage of trading using opposite Performance Food and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food 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.| Performance Food vs. FANDIFI TECHNOLOGY P | Performance Food vs. Tencent Music Entertainment | Performance Food vs. SCOTT TECHNOLOGY | Performance Food vs. ScanSource |
| Morgan Stanley vs. Morgan Stanley | Morgan Stanley vs. The Goldman Sachs | Morgan Stanley vs. Superior Plus Corp | Morgan Stanley vs. NMI Holdings |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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