Correlation Between Morgan Stanley and Creek Road

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

By analyzing existing cross correlation between Morgan Stanley and Creek Road Miners, you can compare the effects of market volatilities on Morgan Stanley and Creek Road 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 Creek Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Creek Road.

Diversification Opportunities for Morgan Stanley and Creek Road

0.74

Correlation Coefficient

Morgan Stanley  Creek Road

Poor diversification

The 3 months correlation between Morgan and Creek is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Creek Road Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Creek Road Miners 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 are associated (or correlated) with Creek Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Creek Road Miners has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Creek Road go up and down completely randomly.

Pair Corralation between Morgan Stanley and Creek Road

Assuming the 90 days horizon Morgan Stanley is expected to generate 29.98 times less return on investment than Creek Road. But when comparing it to its historical volatility, Morgan Stanley is 22.43 times less risky than Creek Road. It trades about 0.09 of its potential returns per unit of risk. Creek Road Miners is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7.90  in Creek Road Miners on September 18, 2024 and sell it today you would earn a total of  15.10  from holding Creek Road Miners or generate 191.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	28.89%
Values	Daily Returns

Morgan Stanley  vs.  Creek Road Miners

Morgan Stanley

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Creek Road Miners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Creek Road Miners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Creek Road is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Morgan Stanley and Creek Road

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

The idea behind Morgan Stanley and Creek Road Miners 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.