Correlation Between Morgan Stanley and Sterling Capital

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Sterling 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 Sterling Capital 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 Sterling Capital Virginia, you can compare the effects of market volatilities on Morgan Stanley and Sterling 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Sterling Capital.

Diversification Opportunities for Morgan Stanley and Sterling Capital

0.24

Correlation Coefficient

Morgan Stanley  Sterling Capital

Modest diversification

The 3 months correlation between Morgan and Sterling is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Sterling Capital Virginia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Virginia 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Virginia has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Sterling Capital go up and down completely randomly.

Pair Corralation between Morgan Stanley and Sterling Capital

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Sterling Capital. In addition to that, Morgan Stanley is 7.31 times more volatile than Sterling Capital Virginia. It trades about -0.03 of its total potential returns per unit of risk. Sterling Capital Virginia is currently generating about 0.02 per unit of volatility. If you would invest  1,096  in Sterling Capital Virginia on October 7, 2024 and sell it today you would earn a total of  4.00  from holding Sterling Capital Virginia or generate 0.36% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Sterling Capital Virginia

Morgan Stanley Direct

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 9 (%) 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 February 2025.

Sterling Capital Virginia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Virginia has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Sterling Capital 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 Sterling Capital

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

The idea behind Morgan Stanley Direct and Sterling Capital Virginia 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.