Correlation Between Morgan Stanley and Hewlett Packard

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

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

Diversification Opportunities for Morgan Stanley and Hewlett Packard

0.58

Correlation Coefficient

Morgan Stanley  Hewlett Packard

Very weak diversification

The 3 months correlation between Morgan and Hewlett is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Hewlett Packard Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hewlett Packard Ente 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 Hewlett Packard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hewlett Packard Ente has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Hewlett Packard go up and down completely randomly.

Pair Corralation between Morgan Stanley and Hewlett Packard

Assuming the 90 days horizon Morgan Stanley is expected to under-perform the Hewlett Packard. But the preferred stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley is 4.08 times less risky than Hewlett Packard. The preferred stock trades about -0.13 of its potential returns per unit of risk. The Hewlett Packard Enterprise is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,291  in Hewlett Packard Enterprise on October 11, 2024 and sell it today you would earn a total of  45.00  from holding Hewlett Packard Enterprise or generate 0.72% return on investment over 90 days.

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

Morgan Stanley  vs.  Hewlett Packard Enterprise

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.

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.

Pair Trading with Morgan Stanley and Hewlett Packard

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

The idea behind Morgan Stanley and Hewlett Packard Enterprise 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.