Correlation Between Hewlett Packard and Morgan Stanley

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

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

Diversification Opportunities for Hewlett Packard and Morgan Stanley

0.58

Correlation Coefficient

Hewlett Packard  Morgan Stanley

Very weak diversification

The 3 months correlation between Hewlett and Morgan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Hewlett Packard 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 Hewlett Packard Enterprise 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 Hewlett Packard i.e., Hewlett Packard and Morgan Stanley go up and down completely randomly.

Pair Corralation between Hewlett Packard and Morgan Stanley

Assuming the 90 days trading horizon Hewlett Packard Enterprise is expected to generate 4.49 times more return on investment than Morgan Stanley. However, Hewlett Packard is 4.49 times more volatile than Morgan Stanley. It trades about 0.04 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.16 per unit of risk. If you would invest  6,056  in Hewlett Packard Enterprise on October 11, 2024 and sell it today you would earn a total of  280.00  from holding Hewlett Packard Enterprise or generate 4.62% return on investment over 90 days.

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

Hewlett Packard Enterprise  vs.  Morgan Stanley

Hewlett Packard Ente

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hewlett Packard is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Morgan Stanley

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hewlett Packard and Morgan Stanley

The main advantage of trading using opposite Hewlett Packard and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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 Hewlett Packard Enterprise 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.