Correlation Between Legg Mason and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Legg Mason 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 Legg Mason and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legg Mason Partners and Morgan Stanley Institutional, you can compare the effects of market volatilities on Legg Mason 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 Legg Mason with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legg Mason and Morgan Stanley.
Diversification Opportunities for Legg Mason and Morgan Stanley
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Legg and Morgan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Legg Mason Partners and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti and Legg Mason 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 Legg Mason Partners 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 Insti has no effect on the direction of Legg Mason i.e., Legg Mason and Morgan Stanley go up and down completely randomly.
Pair Corralation between Legg Mason and Morgan Stanley
Assuming the 90 days trading horizon Legg Mason Partners is expected to generate 1.7 times more return on investment than Morgan Stanley. However, Legg Mason is 1.7 times more volatile than Morgan Stanley Institutional. It trades about 0.1 of its potential returns per unit of risk. Morgan Stanley Institutional is currently generating about 0.09 per unit of risk. If you would invest 1,038 in Legg Mason Partners on September 4, 2024 and sell it today you would earn a total of 273.00 from holding Legg Mason Partners or generate 26.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 28.48% |
| Values | Daily Returns |
Legg Mason Partners vs. Morgan Stanley Institutional
Performance |
| Timeline |
| Legg Mason Partners |
| Morgan Stanley Insti |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Legg Mason and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legg Mason and Morgan Stanley
The main advantage of trading using opposite Legg Mason and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legg Mason 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.| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
| Morgan Stanley vs. T Rowe Price | Morgan Stanley vs. Legg Mason Partners | Morgan Stanley vs. Jp Morgan Smartretirement | Morgan Stanley vs. T Rowe Price |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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