Correlation Between Applied Materials and Morgan Stanley

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

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

Diversification Opportunities for Applied Materials and Morgan Stanley

0.92

Correlation Coefficient

Applied Materials  Morgan Stanley

Almost no diversification

The 3 months correlation between Applied and Morgan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Applied Materials 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 Applied Materials 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 has no effect on the direction of Applied Materials i.e., Applied Materials and Morgan Stanley go up and down completely randomly.

Pair Corralation between Applied Materials and Morgan Stanley

Assuming the 90 days horizon Applied Materials is expected to generate 1.55 times more return on investment than Morgan Stanley. However, Applied Materials is 1.55 times more volatile than Morgan Stanley. It trades about 0.3 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.25 per unit of risk. If you would invest  14,900  in Applied Materials on April 22, 2025 and sell it today you would earn a total of  1,658  from holding Applied Materials or generate 11.13% return on investment over 90 days.

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

Applied Materials  vs.  Morgan Stanley

Applied Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Morgan Stanley reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and Morgan Stanley

The main advantage of trading using opposite Applied Materials and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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 Applied Materials and Morgan Stanley 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..