Correlation Between Morgan Stanley and Lendingtree

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

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

Diversification Opportunities for Morgan Stanley and Lendingtree

-0.71

Correlation Coefficient

Morgan Stanley  Lendingtree

Pay attention - limited upside

The 3 months correlation between Morgan and Lendingtree is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Lendingtree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendingtree 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 Lendingtree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendingtree has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Lendingtree go up and down completely randomly.

Pair Corralation between Morgan Stanley and Lendingtree

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.14 times less return on investment than Lendingtree. But when comparing it to its historical volatility, Morgan Stanley is 2.72 times less risky than Lendingtree. It trades about 0.11 of its potential returns per unit of risk. Lendingtree is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,966  in Lendingtree on October 2, 2024 and sell it today you would earn a total of  928.00  from holding Lendingtree or generate 31.29% return on investment over 90 days.

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

Morgan Stanley  vs.  Lendingtree

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. 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.

Lendingtree

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lendingtree has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Morgan Stanley and Lendingtree

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

The idea behind Morgan Stanley and Lendingtree 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.