Correlation Between Penn National and Morgan Stanley

Can any of the company-specific risk be diversified away by investing in both Penn National and Morgan Stanley 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 Penn National and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penn National Gaming and Morgan Stanley Global, you can compare the effects of market volatilities on Penn National and Morgan Stanley 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 Penn National with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and Morgan Stanley.

Diversification Opportunities for Penn National and Morgan Stanley

0.23

Correlation Coefficient

Penn National  Morgan Stanley

Modest diversification

The 3 months correlation between Penn and Morgan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and Morgan Stanley Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Global and Penn National 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 Penn National Gaming are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Global has no effect on the direction of Penn National i.e., Penn National and Morgan Stanley go up and down completely randomly.

Pair Corralation between Penn National and Morgan Stanley

Given the investment horizon of 90 days Penn National is expected to generate 1.34 times less return on investment than Morgan Stanley. In addition to that, Penn National is 2.11 times more volatile than Morgan Stanley Global. It trades about 0.05 of its total potential returns per unit of risk. Morgan Stanley Global is currently generating about 0.15 per unit of volatility. If you would invest  1,609  in Morgan Stanley Global on October 23, 2024 and sell it today you would earn a total of  220.00  from holding Morgan Stanley Global or generate 13.67% return on investment over 90 days.

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

Penn National Gaming  vs.  Morgan Stanley Global

Penn National Gaming

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Morgan Stanley Global

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Global are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and Morgan Stanley

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

The idea behind Penn National Gaming and Morgan Stanley Global 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.