Correlation Between Amazon and Morgan Stanley

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

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

Diversification Opportunities for Amazon and Morgan Stanley

0.78

Correlation Coefficient

Amazon  Morgan Stanley

Poor diversification

The 3 months correlation between Amazon and Morgan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Amazon 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 Amazon Inc 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 Amazon i.e., Amazon and Morgan Stanley go up and down completely randomly.

Pair Corralation between Amazon and Morgan Stanley

Assuming the 90 days trading horizon Amazon Inc is expected to under-perform the Morgan Stanley. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.31 times less risky than Morgan Stanley. The stock trades about -0.19 of its potential returns per unit of risk. The Morgan Stanley is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  11,881  in Morgan Stanley on December 21, 2024 and sell it today you would lose (755.00) from holding Morgan Stanley or give up 6.35% of portfolio value over 90 days.

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

Amazon Inc  vs.  Morgan Stanley

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amazon and Morgan Stanley

The main advantage of trading using opposite Amazon and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.

The idea behind Amazon Inc and Morgan Stanley 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.