Correlation Between Morgan Stanley and Gabelli Dividend

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

Diversification Opportunities for Morgan Stanley and Gabelli Dividend

0.85

Correlation Coefficient

Morgan Stanley  Gabelli Dividend

Very poor diversification

The 3 months correlation between Morgan and Gabelli is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and The Gabelli Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Dividend 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 Gabelli Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Dividend has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Gabelli Dividend go up and down completely randomly.

Pair Corralation between Morgan Stanley and Gabelli Dividend

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 2.38 times more return on investment than Gabelli Dividend. However, Morgan Stanley is 2.38 times more volatile than The Gabelli Dividend. It trades about 0.04 of its potential returns per unit of risk. The Gabelli Dividend is currently generating about 0.07 per unit of risk. If you would invest  1,907  in Morgan Stanley Direct on September 14, 2024 and sell it today you would earn a total of  223.00  from holding Morgan Stanley Direct or generate 11.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	57.25%
Values	Daily Returns

Morgan Stanley Direct  vs.  The Gabelli Dividend

Morgan Stanley Direct

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 11 (%) 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.

Gabelli Dividend

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Dividend are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Gabelli Dividend 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 Gabelli Dividend

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

The idea behind Morgan Stanley Direct and The Gabelli Dividend 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.

Check out your portfolio center.

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.