Correlation Between Morgan Stanley and Moodys

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Moodys 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 Moodys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morgan Stanley and Moodys, you can compare the effects of market volatilities on Morgan Stanley and Moodys 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 Moodys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Moodys.

Diversification Opportunities for Morgan Stanley and Moodys

0.87

Correlation Coefficient

Morgan Stanley  Moodys

Very poor diversification

The 1 month correlation between Morgan and Moodys is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys 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 Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Moodys go up and down completely randomly.

Pair Corralation between Morgan Stanley and Moodys

Assuming the 90 days trading horizon Morgan Stanley is expected to generate 6.32 times less return on investment than Moodys. But when comparing it to its historical volatility, Morgan Stanley is 1.71 times less risky than Moodys. It trades about 0.05 of its potential returns per unit of risk. Moodys is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  35,709  in Moodys on March 8, 2024 and sell it today you would earn a total of  1,761  from holding Moodys or generate 4.93% return on investment over 90 days.

Time Period	1 Month [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Morgan Stanley  vs.  Moodys

Morgan Stanley

Risk-Adjusted Performance

3 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Moodys

Risk-Adjusted Performance

13 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Moodys are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Moodys reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Moodys

The main advantage of trading using opposite Morgan Stanley and Moodys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Moodys 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 Moodys will offset losses from the drop in Moodys' long position.

The idea behind Morgan Stanley and Moodys 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.