Correlation Between Morgan Stanley and Guaranty Trust

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

Diversification Opportunities for Morgan Stanley and Guaranty Trust

0.46

Correlation Coefficient

Morgan Stanley  Guaranty Trust

Very weak diversification

The 3 months correlation between Morgan and Guaranty is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding 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 Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Guaranty Trust go up and down completely randomly.

Pair Corralation between Morgan Stanley and Guaranty Trust

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Guaranty Trust. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 1.57 times less risky than Guaranty Trust. The stock trades about -0.06 of its potential returns per unit of risk. The Guaranty Trust Holding is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Guaranty Trust Holding on October 15, 2024 and sell it today you would earn a total of  10.00  from holding Guaranty Trust Holding or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Morgan Stanley Direct  vs.  Guaranty Trust Holding

Morgan Stanley Direct

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Guaranty Trust Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Guaranty Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Morgan Stanley and Guaranty Trust

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

The idea behind Morgan Stanley Direct and Guaranty Trust Holding 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.