Correlation Between Morgan Stanley and TRAVELERS

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and TRAVELERS 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 TRAVELERS 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 TRAVELERS INC 4, you can compare the effects of market volatilities on Morgan Stanley and TRAVELERS 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 TRAVELERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and TRAVELERS.

Diversification Opportunities for Morgan Stanley and TRAVELERS

-0.32

Correlation Coefficient

Morgan Stanley  TRAVELERS

Very good diversification

The 3 months correlation between Morgan and TRAVELERS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and TRAVELERS INC 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVELERS INC 4 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 TRAVELERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVELERS INC 4 has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and TRAVELERS go up and down completely randomly.

Pair Corralation between Morgan Stanley and TRAVELERS

Given the investment horizon of 90 days Morgan Stanley is expected to generate 161.0 times less return on investment than TRAVELERS. But when comparing it to its historical volatility, Morgan Stanley Direct is 63.13 times less risky than TRAVELERS. It trades about 0.04 of its potential returns per unit of risk. TRAVELERS INC 4 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,106  in TRAVELERS INC 4 on September 16, 2024 and sell it today you would earn a total of  121.00  from holding TRAVELERS INC 4 or generate 1.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.5%
Values	Daily Returns

Morgan Stanley Direct  vs.  TRAVELERS INC 4

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TRAVELERS INC 4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRAVELERS INC 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for TRAVELERS INC 4 investors.

Pair Trading with Morgan Stanley and TRAVELERS

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

The idea behind Morgan Stanley Direct and TRAVELERS INC 4 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.