Correlation Between Morgan Stanley and Safety Insurance

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

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

Diversification Opportunities for Morgan Stanley and Safety Insurance

0.85

Correlation Coefficient

Morgan Stanley  Safety Insurance

Very poor diversification

The 3 months correlation between Morgan and Safety is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Safety Insurance go up and down completely randomly.

Pair Corralation between Morgan Stanley and Safety Insurance

Assuming the 90 days trading horizon Morgan Stanley is expected to generate 1.02 times more return on investment than Safety Insurance. However, Morgan Stanley is 1.02 times more volatile than Safety Insurance Group. It trades about 0.06 of its potential returns per unit of risk. Safety Insurance Group is currently generating about 0.02 per unit of risk. If you would invest  8,146  in Morgan Stanley on October 11, 2024 and sell it today you would earn a total of  4,188  from holding Morgan Stanley or generate 51.41% return on investment over 90 days.

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

Morgan Stanley  vs.  Safety Insurance Group

Morgan Stanley

Risk-Adjusted Performance

11 of 100

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. In spite of rather fragile fundamental indicators, Morgan Stanley exhibited solid returns over the last few months and may actually be approaching a breakup point.

Safety Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Safety Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Morgan Stanley and Safety Insurance

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

The idea behind Morgan Stanley and Safety Insurance 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.