Correlation Between Central Europe and Morgan Stanley

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

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

Diversification Opportunities for Central Europe and Morgan Stanley

0.59

Correlation Coefficient

Central Europe  Morgan Stanley

Very weak diversification

The 3 months correlation between Central and Morgan is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Central Europe Russia and Morgan Stanley China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley China and Central Europe 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 Central Europe Russia 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 China has no effect on the direction of Central Europe i.e., Central Europe and Morgan Stanley go up and down completely randomly.

Pair Corralation between Central Europe and Morgan Stanley

Considering the 90-day investment horizon Central Europe Russia is expected to generate 2.12 times more return on investment than Morgan Stanley. However, Central Europe is 2.12 times more volatile than Morgan Stanley China. It trades about 0.16 of its potential returns per unit of risk. Morgan Stanley China is currently generating about 0.05 per unit of risk. If you would invest  1,152  in Central Europe Russia on November 28, 2024 and sell it today you would earn a total of  334.00  from holding Central Europe Russia or generate 28.99% return on investment over 90 days.

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

Central Europe Russia  vs.  Morgan Stanley China

Central Europe Russia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Europe Russia are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather fragile technical and fundamental indicators, Central Europe exhibited solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley China

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley China are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Morgan Stanley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Central Europe and Morgan Stanley

The main advantage of trading using opposite Central Europe and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Europe 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 Central Europe Russia and Morgan Stanley China 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.