Correlation Between Visa and Morgan Stanley

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

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

Diversification Opportunities for Visa and Morgan Stanley

0.31

Correlation Coefficient

Visa  Morgan Stanley

Weak diversification

The 3 months correlation between Visa and Morgan is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Morgan Stanley Pathway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Pathway and Visa 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 Visa Class A 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 Pathway has no effect on the direction of Visa i.e., Visa and Morgan Stanley go up and down completely randomly.

Pair Corralation between Visa and Morgan Stanley

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.17 times more return on investment than Morgan Stanley. However, Visa is 1.17 times more volatile than Morgan Stanley Pathway. It trades about 0.07 of its potential returns per unit of risk. Morgan Stanley Pathway is currently generating about -0.13 per unit of risk. If you would invest  22,085  in Visa Class A on October 11, 2024 and sell it today you would earn a total of  9,175  from holding Visa Class A or generate 41.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.44%
Values	Daily Returns

Visa Class A  vs.  Morgan Stanley Pathway

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Morgan Stanley Pathway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Pathway has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Visa and Morgan Stanley

The main advantage of trading using opposite Visa and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A and Morgan Stanley Pathway 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.