Correlation Between STMicroelectronics and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Morgan Stanley, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Morgan Stanley.
Diversification Opportunities for STMicroelectronics and Morgan Stanley
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between STMicroelectronics and Morgan is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and Morgan Stanley go up and down completely randomly.
Pair Corralation between STMicroelectronics and Morgan Stanley
Assuming the 90 days trading horizon STMicroelectronics NV is expected to generate 1.3 times more return on investment than Morgan Stanley. However, STMicroelectronics is 1.3 times more volatile than Morgan Stanley. It trades about 0.08 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.01 per unit of risk. If you would invest 15,500 in STMicroelectronics NV on September 13, 2024 and sell it today you would earn a total of 468.00 from holding STMicroelectronics NV or generate 3.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. Morgan Stanley
Performance |
| Timeline |
| STMicroelectronics |
| Morgan Stanley |
STMicroelectronics and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Morgan Stanley
The main advantage of trading using opposite STMicroelectronics and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. Multilaser Industrial SA | STMicroelectronics vs. Apartment Investment and | STMicroelectronics vs. Zoom Video Communications | STMicroelectronics vs. Nordon Indstrias Metalrgicas |
| Morgan Stanley vs. Arrow Electronics, | Morgan Stanley vs. Apartment Investment and | Morgan Stanley vs. Global X Funds | Morgan Stanley vs. GP Investments |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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