Correlation Between Morgan Stanley and Ameriprise Financial

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

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

Diversification Opportunities for Morgan Stanley and Ameriprise Financial

0.72

Correlation Coefficient

Morgan Stanley  Ameriprise Financial

Poor diversification

The 3 months correlation between Morgan and Ameriprise is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Morgan Stanley and Ameriprise Financial

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.45 times more return on investment than Ameriprise Financial. However, Morgan Stanley is 1.45 times more volatile than Ameriprise Financial. It trades about 0.27 of its potential returns per unit of risk. Ameriprise Financial is currently generating about 0.32 per unit of risk. If you would invest  9,299  in Morgan Stanley on February 24, 2024 and sell it today you would earn a total of  593.00  from holding Morgan Stanley or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley  vs.  Ameriprise Financial

Morgan Stanley

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ameriprise Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Ameriprise Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Morgan Stanley and Ameriprise Financial

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

The idea behind Morgan Stanley and Ameriprise Financial 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.