Correlation Between Morgan Stanley and Victory Capital

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

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

Diversification Opportunities for Morgan Stanley and Victory Capital

0.86

Correlation Coefficient

Morgan Stanley  Victory Capital

Very poor diversification

The 3 months correlation between Morgan and Victory is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Victory Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Capital Holdings 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 Victory Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Capital Holdings has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Victory Capital go up and down completely randomly.

Pair Corralation between Morgan Stanley and Victory Capital

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 0.91 times more return on investment than Victory Capital. However, Morgan Stanley is 1.09 times less risky than Victory Capital. It trades about -0.03 of its potential returns per unit of risk. Victory Capital Holdings is currently generating about -0.05 per unit of risk. If you would invest  12,492  in Morgan Stanley on December 28, 2024 and sell it today you would lose (592.00) from holding Morgan Stanley or give up 4.74% of portfolio value over 90 days.

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

Morgan Stanley  vs.  Victory Capital Holdings

Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Victory Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Morgan Stanley and Victory Capital

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

The idea behind Morgan Stanley and Victory Capital Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.