Correlation Between American Express and MORGAN

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

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

Diversification Opportunities for American Express and MORGAN

0.26

Correlation Coefficient

American Express  MORGAN

Modest diversification

The 3 months correlation between American and MORGAN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding American Express and MORGAN STANLEY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MORGAN STANLEY and American Express 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 American Express are associated (or correlated) with MORGAN. 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 American Express i.e., American Express and MORGAN go up and down completely randomly.

Pair Corralation between American Express and MORGAN

Considering the 90-day investment horizon American Express is expected to under-perform the MORGAN. In addition to that, American Express is 16.51 times more volatile than MORGAN STANLEY. It trades about -0.02 of its total potential returns per unit of risk. MORGAN STANLEY is currently generating about 0.15 per unit of volatility. If you would invest  9,579  in MORGAN STANLEY on December 4, 2024 and sell it today you would earn a total of  74.00  from holding MORGAN STANLEY or generate 0.77% return on investment over 90 days.

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

American Express  vs.  MORGAN STANLEY

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, American Express is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

MORGAN STANLEY

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MORGAN STANLEY are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MORGAN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and MORGAN

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

The idea behind American Express 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..