Correlation Between Morgan Stanley and Interactive Brokers

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

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

Diversification Opportunities for Morgan Stanley and Interactive Brokers

0.59

Correlation Coefficient

Morgan Stanley  Interactive Brokers

Very weak diversification

The 3 months correlation between Morgan and Interactive is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Interactive Brokers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interactive Brokers 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 Interactive Brokers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interactive Brokers has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Interactive Brokers go up and down completely randomly.

Pair Corralation between Morgan Stanley and Interactive Brokers

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.64 times less return on investment than Interactive Brokers. In addition to that, Morgan Stanley is 1.08 times more volatile than Interactive Brokers Group. It trades about 0.09 of its total potential returns per unit of risk. Interactive Brokers Group is currently generating about 0.15 per unit of volatility. If you would invest  11,024  in Interactive Brokers Group on January 26, 2024 and sell it today you would earn a total of  540.00  from holding Interactive Brokers Group or generate 4.9% return on investment over 90 days.

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

Morgan Stanley  vs.  Interactive Brokers Group

Morgan Stanley

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Interactive Brokers

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Brokers Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward-looking signals, Interactive Brokers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Interactive Brokers

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

The idea behind Morgan Stanley and Interactive Brokers Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.