Correlation Between Apple and Morgan Stanley

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

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

Diversification Opportunities for Apple and Morgan Stanley

0.54

Correlation Coefficient

Apple  Morgan Stanley

Very weak diversification

The 3 months correlation between Apple and Morgan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Apple 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 Apple 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 Apple i.e., Apple and Morgan Stanley go up and down completely randomly.

Pair Corralation between Apple and Morgan Stanley

Assuming the 90 days trading horizon Apple Inc is expected to under-perform the Morgan Stanley. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.17 times less risky than Morgan Stanley. The stock trades about -0.18 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  11,753  in Morgan Stanley on December 21, 2024 and sell it today you would lose (757.00) from holding Morgan Stanley or give up 6.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Apple Inc  vs.  Morgan Stanley

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company 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 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.

Pair Trading with Apple and Morgan Stanley

The main advantage of trading using opposite Apple and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.