Correlation Between Morgan Stanley and Marsh McLennan

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

Diversification Opportunities for Morgan Stanley and Marsh McLennan

0.55

Correlation Coefficient

Morgan Stanley  Marsh McLennan

Very weak diversification

The 3 months correlation between Morgan and Marsh is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Marsh McLennan Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marsh McLennan Companies 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 Marsh McLennan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marsh McLennan Companies has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Marsh McLennan go up and down completely randomly.

Pair Corralation between Morgan Stanley and Marsh McLennan

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 1.15 times more return on investment than Marsh McLennan. However, Morgan Stanley is 1.15 times more volatile than Marsh McLennan Companies. It trades about 0.04 of its potential returns per unit of risk. Marsh McLennan Companies is currently generating about -0.4 per unit of risk. If you would invest  2,084  in Morgan Stanley Direct on September 28, 2024 and sell it today you would earn a total of  17.00  from holding Morgan Stanley Direct or generate 0.82% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Marsh McLennan Companies

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) 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.

Marsh McLennan Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marsh McLennan Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marsh McLennan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Morgan Stanley and Marsh McLennan

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

The idea behind Morgan Stanley Direct and Marsh McLennan Companies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.