Correlation Between BGC and Morgan Stanley

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

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

Diversification Opportunities for BGC and Morgan Stanley

0.49

Correlation Coefficient

BGC  Morgan Stanley

Very weak diversification

The 3 months correlation between BGC and Morgan is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BGC Group and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and BGC 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 BGC Group 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 BGC i.e., BGC and Morgan Stanley go up and down completely randomly.

Pair Corralation between BGC and Morgan Stanley

Considering the 90-day investment horizon BGC Group is expected to generate 2.63 times more return on investment than Morgan Stanley. However, BGC is 2.63 times more volatile than Morgan Stanley. It trades about 0.08 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.01 per unit of risk. If you would invest  419.00  in BGC Group on February 18, 2025 and sell it today you would earn a total of  584.00  from holding BGC Group or generate 139.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

BGC Group  vs.  Morgan Stanley

BGC Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BGC Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, BGC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Preferred Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with BGC and Morgan Stanley

The main advantage of trading using opposite BGC and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BGC 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 BGC Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.