Correlation Between Morgan Stanley and Stepstone

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

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

Diversification Opportunities for Morgan Stanley and Stepstone

0.95

Correlation Coefficient

Morgan Stanley  Stepstone

Almost no diversification

The 3 months correlation between Morgan and Stepstone is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Stepstone go up and down completely randomly.

Pair Corralation between Morgan Stanley and Stepstone

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 0.99 times more return on investment than Stepstone. However, Morgan Stanley is 1.01 times less risky than Stepstone. It trades about 0.22 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.08 per unit of risk. If you would invest  10,703  in Morgan Stanley on September 4, 2024 and sell it today you would earn a total of  2,400  from holding Morgan Stanley or generate 22.42% return on investment over 90 days.

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

Morgan Stanley  vs.  Stepstone Group

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 uncertain basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Stepstone Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Stepstone

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

The idea behind Morgan Stanley and Stepstone Group 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.