Correlation Between Morgan Stanley and Goldman Sachs

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

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

Diversification Opportunities for Morgan Stanley and Goldman Sachs

0.0

Correlation Coefficient

Morgan Stanley  Goldman Sachs

Pay attention - limited upside

The 3 months correlation between Morgan and Goldman is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Multi and Goldman Sachs Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Financial 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 Multi are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Financial has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Goldman Sachs go up and down completely randomly.

Pair Corralation between Morgan Stanley and Goldman Sachs

Assuming the 90 days horizon Morgan Stanley is expected to generate 5.3 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Morgan Stanley Multi is 11.34 times less risky than Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  402.00  in Goldman Sachs Financial on October 4, 2024 and sell it today you would lose (302.00) from holding Goldman Sachs Financial or give up 75.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.02%
Values	Daily Returns

Morgan Stanley Multi  vs.  Goldman Sachs Financial

Morgan Stanley Multi

Risk-Adjusted Performance

17 of 100

Solid

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

Goldman Sachs Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Financial has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Goldman Sachs

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

The idea behind Morgan Stanley Multi and Goldman Sachs Financial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.