Correlation Between Morgan Stanley and Regions Financial

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

By analyzing existing cross correlation between Morgan Stanley and Regions Financial, you can compare the effects of market volatilities on Morgan Stanley and Regions Financial 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 Regions Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Regions Financial.

Diversification Opportunities for Morgan Stanley and Regions Financial

0.82

Correlation Coefficient

Morgan Stanley  Regions Financial

Very poor diversification

The 3 months correlation between Morgan and Regions is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial 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 are associated (or correlated) with Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Regions Financial go up and down completely randomly.

Pair Corralation between Morgan Stanley and Regions Financial

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 1.05 times more return on investment than Regions Financial. However, Morgan Stanley is 1.05 times more volatile than Regions Financial. It trades about 0.05 of its potential returns per unit of risk. Regions Financial is currently generating about -0.05 per unit of risk. If you would invest  9,215  in Morgan Stanley on February 3, 2024 and sell it today you would earn a total of  146.00  from holding Morgan Stanley or generate 1.58% return on investment over 90 days.

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

Morgan Stanley  vs.  Regions Financial

Morgan Stanley

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Regions Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Regions Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Morgan Stanley and Regions Financial

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

The idea behind Morgan Stanley and Regions Financial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.