Correlation Between CullenFrost Bankers and Morgan Stanley

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

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

Diversification Opportunities for CullenFrost Bankers and Morgan Stanley

0.32

Correlation Coefficient

CullenFrost Bankers  Morgan Stanley

Weak diversification

The 3 months correlation between CullenFrost and Morgan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CullenFrost Bankers and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and CullenFrost Bankers 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 CullenFrost Bankers 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 CullenFrost Bankers i.e., CullenFrost Bankers and Morgan Stanley go up and down completely randomly.

Pair Corralation between CullenFrost Bankers and Morgan Stanley

Assuming the 90 days trading horizon CullenFrost Bankers is expected to under-perform the Morgan Stanley. In addition to that, CullenFrost Bankers is 1.97 times more volatile than Morgan Stanley. It trades about -0.15 of its total potential returns per unit of risk. Morgan Stanley is currently generating about 0.04 per unit of volatility. If you would invest  2,581  in Morgan Stanley on September 5, 2024 and sell it today you would earn a total of  33.00  from holding Morgan Stanley or generate 1.28% return on investment over 90 days.

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

CullenFrost Bankers  vs.  Morgan Stanley

CullenFrost Bankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Morgan Stanley

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Morgan Stanley is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CullenFrost Bankers and Morgan Stanley

The main advantage of trading using opposite CullenFrost Bankers and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CullenFrost Bankers 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 CullenFrost Bankers 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.