Correlation Between Citigroup and Morgan Stanley

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

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

Diversification Opportunities for Citigroup and Morgan Stanley

0.65

Correlation Coefficient

Citigroup  Morgan Stanley

Poor diversification

The 3 months correlation between Citigroup and Morgan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Morgan Stanley Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Focus and Citigroup 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 Citigroup 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 Focus has no effect on the direction of Citigroup i.e., Citigroup and Morgan Stanley go up and down completely randomly.

Pair Corralation between Citigroup and Morgan Stanley

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.18 times less return on investment than Morgan Stanley. In addition to that, Citigroup is 2.45 times more volatile than Morgan Stanley Focus. It trades about 0.06 of its total potential returns per unit of risk. Morgan Stanley Focus is currently generating about 0.18 per unit of volatility. If you would invest  868.00  in Morgan Stanley Focus on September 21, 2024 and sell it today you would earn a total of  140.00  from holding Morgan Stanley Focus or generate 16.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.51%
Values	Daily Returns

Citigroup  vs.  Morgan Stanley Focus

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Morgan Stanley Focus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Focus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Morgan Stanley

The main advantage of trading using opposite Citigroup and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup and Morgan Stanley Focus 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.