Correlation Between Cairo Communication and Morgan Stanley

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

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

Diversification Opportunities for Cairo Communication and Morgan Stanley

-0.53

Correlation Coefficient

Cairo Communication  Morgan Stanley

Excellent diversification

The 3 months correlation between Cairo and Morgan is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Cairo Communication 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 Cairo Communication SpA 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 Cairo Communication i.e., Cairo Communication and Morgan Stanley go up and down completely randomly.

Pair Corralation between Cairo Communication and Morgan Stanley

Assuming the 90 days trading horizon Cairo Communication SpA is expected to generate 0.74 times more return on investment than Morgan Stanley. However, Cairo Communication SpA is 1.35 times less risky than Morgan Stanley. It trades about 0.18 of its potential returns per unit of risk. Morgan Stanley is currently generating about -0.03 per unit of risk. If you would invest  237.00  in Cairo Communication SpA on December 22, 2024 and sell it today you would earn a total of  46.00  from holding Cairo Communication SpA or generate 19.41% return on investment over 90 days.

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

Cairo Communication SpA  vs.  Morgan Stanley

Cairo Communication SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Cairo Communication unveiled solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cairo Communication and Morgan Stanley

The main advantage of trading using opposite Cairo Communication and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairo Communication 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 Cairo Communication SpA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.