Correlation Between Morgan Stanley and Blue Owl

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

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

Diversification Opportunities for Morgan Stanley and Blue Owl

0.73

Correlation Coefficient

Morgan Stanley  Blue Owl

Poor diversification

The 3 months correlation between Morgan and Blue is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Blue Owl Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Owl Capital 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 Blue Owl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Owl Capital has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Blue Owl go up and down completely randomly.

Pair Corralation between Morgan Stanley and Blue Owl

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 2.52 times more return on investment than Blue Owl. However, Morgan Stanley is 2.52 times more volatile than Blue Owl Capital. It trades about 0.22 of its potential returns per unit of risk. Blue Owl Capital is currently generating about 0.14 per unit of risk. If you would invest  9,748  in Morgan Stanley on September 13, 2024 and sell it today you would earn a total of  3,011  from holding Morgan Stanley or generate 30.89% return on investment over 90 days.

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

Morgan Stanley  vs.  Blue Owl Capital

Morgan Stanley

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blue Owl Capital

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Owl Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Blue Owl may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Morgan Stanley and Blue Owl

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

The idea behind Morgan Stanley and Blue Owl Capital 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..