Correlation Between Morgan Stanley and Deutsche Bank

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

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

Diversification Opportunities for Morgan Stanley and Deutsche Bank

0.05

Correlation Coefficient

Morgan Stanley  Deutsche Bank

Significant diversification

The 3 months correlation between Morgan and Deutsche is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Deutsche Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Bank AG 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 Deutsche Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Bank AG has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Deutsche Bank go up and down completely randomly.

Pair Corralation between Morgan Stanley and Deutsche Bank

Assuming the 90 days horizon Morgan Stanley is expected to generate 0.24 times more return on investment than Deutsche Bank. However, Morgan Stanley is 4.18 times less risky than Deutsche Bank. It trades about 0.19 of its potential returns per unit of risk. Deutsche Bank AG is currently generating about -0.11 per unit of risk. If you would invest  2,502  in Morgan Stanley on October 6, 2024 and sell it today you would earn a total of  24.00  from holding Morgan Stanley or generate 0.96% return on investment over 90 days.

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

Morgan Stanley  vs.  Deutsche Bank AG

Morgan Stanley

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Deutsche Bank AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Bank AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Deutsche Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Deutsche Bank

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

The idea behind Morgan Stanley and Deutsche Bank AG 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.