Correlation Between Morgan Stanley and Wayfair

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

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

Diversification Opportunities for Morgan Stanley and Wayfair

-0.05

Correlation Coefficient

Morgan Stanley  Wayfair

Good diversification

The 3 months correlation between Morgan and Wayfair is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair 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 Direct are associated (or correlated) with Wayfair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayfair has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Wayfair go up and down completely randomly.

Pair Corralation between Morgan Stanley and Wayfair

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.7 times less return on investment than Wayfair. But when comparing it to its historical volatility, Morgan Stanley Direct is 3.85 times less risky than Wayfair. It trades about 0.09 of its potential returns per unit of risk. Wayfair is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,403  in Wayfair on September 23, 2024 and sell it today you would earn a total of  169.00  from holding Wayfair or generate 3.84% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Wayfair

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wayfair

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wayfair has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Morgan Stanley and Wayfair

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

The idea behind Morgan Stanley Direct and Wayfair 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.