Correlation Between Morgan Stanley and Mastercard Incorporated

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

Diversification Opportunities for Morgan Stanley and Mastercard Incorporated

0.38

Correlation Coefficient

Morgan Stanley  Mastercard Incorporated

Weak diversification

The 3 months correlation between Morgan and Mastercard is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated 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 Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between Morgan Stanley and Mastercard Incorporated

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.62 times more return on investment than Mastercard Incorporated. However, Morgan Stanley Direct is 1.61 times less risky than Mastercard Incorporated. It trades about 0.15 of its potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.07 per unit of risk. If you would invest  1,948  in Morgan Stanley Direct on October 20, 2024 and sell it today you would earn a total of  195.00  from holding Morgan Stanley Direct or generate 10.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Morgan Stanley Direct  vs.  Mastercard Incorporated

Morgan Stanley Direct

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mastercard Incorporated

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Morgan Stanley and Mastercard Incorporated

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

The idea behind Morgan Stanley Direct and Mastercard Incorporated 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.