Correlation Between Morgan Stanley and Biogen

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

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

Diversification Opportunities for Morgan Stanley and Biogen

-0.79

Correlation Coefficient

Morgan Stanley  Biogen

Pay attention - limited upside

The 3 months correlation between Morgan and Biogen is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Biogen go up and down completely randomly.

Pair Corralation between Morgan Stanley and Biogen

Assuming the 90 days trading horizon Morgan Stanley is expected to generate 2.16 times more return on investment than Biogen. However, Morgan Stanley is 2.16 times more volatile than Biogen Inc. It trades about 0.0 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.05 per unit of risk. If you would invest  15,524  in Morgan Stanley on September 25, 2024 and sell it today you would lose (118.00) from holding Morgan Stanley or give up 0.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Morgan Stanley  vs.  Biogen Inc

Morgan Stanley

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Morgan Stanley sustained solid returns over the last few months and may actually be approaching a breakup point.

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Morgan Stanley and Biogen

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

The idea behind Morgan Stanley and Biogen Inc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.