Correlation Between Morgan Stanley and CPL Group

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and CPL Group 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 CPL Group 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 CPL Group Public, you can compare the effects of market volatilities on Morgan Stanley and CPL Group 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 CPL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and CPL Group.

Diversification Opportunities for Morgan Stanley and CPL Group

-0.81

Correlation Coefficient

Morgan Stanley  CPL Group

Pay attention - limited upside

The 3 months correlation between Morgan and CPL is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and CPL Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPL Group Public 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 CPL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPL Group Public has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and CPL Group go up and down completely randomly.

Pair Corralation between Morgan Stanley and CPL Group

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.91 times more return on investment than CPL Group. However, Morgan Stanley Direct is 1.1 times less risky than CPL Group. It trades about 0.2 of its potential returns per unit of risk. CPL Group Public is currently generating about -0.31 per unit of risk. If you would invest  2,033  in Morgan Stanley Direct on September 16, 2024 and sell it today you would earn a total of  85.00  from holding Morgan Stanley Direct or generate 4.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Morgan Stanley Direct  vs.  CPL Group Public

Morgan Stanley Direct

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CPL Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPL Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Morgan Stanley and CPL Group

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

The idea behind Morgan Stanley Direct and CPL Group Public 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.