Correlation Between Morgan Stanley and Medallion Bank

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

Diversification Opportunities for Morgan Stanley and Medallion Bank

-0.14

Correlation Coefficient

Morgan Stanley  Medallion Bank

Good diversification

The 3 months correlation between Morgan and Medallion is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Medallion Bank PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Bank PR 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 Medallion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Bank PR has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Medallion Bank go up and down completely randomly.

Pair Corralation between Morgan Stanley and Medallion Bank

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Medallion Bank. In addition to that, Morgan Stanley is 1.3 times more volatile than Medallion Bank PR. It trades about -0.01 of its total potential returns per unit of risk. Medallion Bank PR is currently generating about 0.07 per unit of volatility. If you would invest  2,458  in Medallion Bank PR on December 29, 2024 and sell it today you would earn a total of  77.00  from holding Medallion Bank PR or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Medallion Bank PR

Morgan Stanley Direct

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Direct has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Medallion Bank PR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Bank PR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Medallion Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Morgan Stanley and Medallion Bank

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

The idea behind Morgan Stanley Direct and Medallion Bank PR 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 Global Correlations module to find global opportunities by holding instruments from different markets.