Correlation Between MORGAN and Gap,

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

By analyzing existing cross correlation between MORGAN STANLEY and The Gap,, you can compare the effects of market volatilities on MORGAN and Gap, 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 with a short position of Gap,. Check out your portfolio center. Please also check ongoing floating volatility patterns of MORGAN and Gap,.

Diversification Opportunities for MORGAN and Gap,

0.02

Correlation Coefficient

MORGAN  Gap,

Significant diversification

The 3 months correlation between MORGAN and Gap, is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding MORGAN STANLEY and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, and MORGAN 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 are associated (or correlated) with Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of MORGAN i.e., MORGAN and Gap, go up and down completely randomly.

Pair Corralation between MORGAN and Gap,

Assuming the 90 days trading horizon MORGAN STANLEY is expected to under-perform the Gap,. But the bond apears to be less risky and, when comparing its historical volatility, MORGAN STANLEY is 7.58 times less risky than Gap,. The bond trades about -0.13 of its potential returns per unit of risk. The The Gap, is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,167  in The Gap, on October 9, 2024 and sell it today you would earn a total of  241.00  from holding The Gap, or generate 11.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

MORGAN STANLEY  vs.  The Gap,

MORGAN STANLEY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MORGAN STANLEY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MORGAN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Gap,

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MORGAN and Gap,

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

The idea behind MORGAN STANLEY and The Gap, 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.