Correlation Between GE Aerospace and Morgan Stanley

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

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

Diversification Opportunities for GE Aerospace and Morgan Stanley

0.71

Correlation Coefficient

GE Aerospace  Morgan Stanley

Poor diversification

The 3 months correlation between GE Aerospace and Morgan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Morgan Stanley ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley ETF and GE Aerospace 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 GE Aerospace 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 ETF has no effect on the direction of GE Aerospace i.e., GE Aerospace and Morgan Stanley go up and down completely randomly.

Pair Corralation between GE Aerospace and Morgan Stanley

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 20.4 times more return on investment than Morgan Stanley. However, GE Aerospace is 20.4 times more volatile than Morgan Stanley ETF. It trades about 0.2 of its potential returns per unit of risk. Morgan Stanley ETF is currently generating about 0.03 per unit of risk. If you would invest  16,779  in GE Aerospace on December 29, 2024 and sell it today you would earn a total of  3,809  from holding GE Aerospace or generate 22.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

GE Aerospace  vs.  Morgan Stanley ETF

GE Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley ETF

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GE Aerospace and Morgan Stanley

The main advantage of trading using opposite GE Aerospace and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace 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 GE Aerospace and Morgan Stanley ETF 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.