Correlation Between Morgan Stanley and Alliance Data

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

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

Diversification Opportunities for Morgan Stanley and Alliance Data

0.0

Correlation Coefficient

Morgan Stanley  Alliance Data

Pay attention - limited upside

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

Pair Corralation between Morgan Stanley and Alliance Data

If you would invest  2,084  in Morgan Stanley Direct on September 28, 2024 and sell it today you would earn a total of  17.00  from holding Morgan Stanley Direct or generate 0.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Alliance Data Systems

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alliance Data Systems

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Morgan Stanley and Alliance Data

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

The idea behind Morgan Stanley Direct and Alliance Data Systems 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.