Correlation Between Citizens Financial and Morgan Stanley

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Can any of the company-specific risk be diversified away by investing in both Citizens Financial 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 Citizens Financial and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citizens Financial Group, and Morgan Stanley, you can compare the effects of market volatilities on Citizens Financial 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 Citizens Financial with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and Morgan Stanley.

Diversification Opportunities for Citizens Financial and Morgan Stanley

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Citizens and Morgan is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group, and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Citizens Financial 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 Citizens Financial Group, 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 Citizens Financial i.e., Citizens Financial and Morgan Stanley go up and down completely randomly.

Pair Corralation between Citizens Financial and Morgan Stanley

Assuming the 90 days trading horizon Citizens Financial is expected to generate 1.28 times less return on investment than Morgan Stanley. In addition to that, Citizens Financial is 1.27 times more volatile than Morgan Stanley. It trades about 0.04 of its total potential returns per unit of risk. Morgan Stanley is currently generating about 0.07 per unit of volatility. If you would invest  9,548  in Morgan Stanley on October 23, 2024 and sell it today you would earn a total of  7,152  from holding Morgan Stanley or generate 74.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.99%
ValuesDaily Returns

Citizens Financial Group,  vs.  Morgan Stanley

 Performance 
       Timeline  
Citizens Financial Group, 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Citizens Financial sustained solid returns over the last few months and may actually be approaching a breakup point.
Morgan Stanley 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Morgan Stanley sustained solid returns over the last few months and may actually be approaching a breakup point.

Citizens Financial and Morgan Stanley Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citizens Financial and Morgan Stanley

The main advantage of trading using opposite Citizens Financial and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens Financial 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 Citizens Financial Group, 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.
Check out your portfolio center.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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