Correlation Between Allstate and Morgan Stanley

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

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

Diversification Opportunities for Allstate and Morgan Stanley

0.83

Correlation Coefficient

Allstate  Morgan Stanley

Very poor diversification

The 3 months correlation between Allstate and Morgan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Allstate 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 The Allstate 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 Allstate i.e., Allstate and Morgan Stanley go up and down completely randomly.

Pair Corralation between Allstate and Morgan Stanley

Assuming the 90 days trading horizon The Allstate is expected to generate 2.77 times more return on investment than Morgan Stanley. However, Allstate is 2.77 times more volatile than Morgan Stanley. It trades about 0.13 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.19 per unit of risk. If you would invest  1,889  in The Allstate on May 4, 2025 and sell it today you would earn a total of  86.00  from holding The Allstate or generate 4.55% return on investment over 90 days.

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

The Allstate  vs.  Morgan Stanley

Allstate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Allstate is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Morgan Stanley

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allstate and Morgan Stanley

The main advantage of trading using opposite Allstate and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate 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 The Allstate 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 Global Correlations module to find global opportunities by holding instruments from different markets.