Correlation Between Morgan Stanley and Coca Cola

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

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

Diversification Opportunities for Morgan Stanley and Coca Cola

-0.58

Correlation Coefficient

Morgan Stanley  Coca Cola

Excellent diversification

The 3 months correlation between Morgan and Coca is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola FEMSA has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Coca Cola go up and down completely randomly.

Pair Corralation between Morgan Stanley and Coca Cola

Assuming the 90 days horizon Morgan Stanley is expected to generate 1.96 times more return on investment than Coca Cola. However, Morgan Stanley is 1.96 times more volatile than Coca Cola FEMSA SAB. It trades about 0.14 of its potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about -0.09 per unit of risk. If you would invest  214,433  in Morgan Stanley on October 12, 2024 and sell it today you would earn a total of  45,469  from holding Morgan Stanley or generate 21.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Morgan Stanley  vs.  Coca Cola FEMSA SAB

Morgan Stanley

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola FEMSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola FEMSA SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Morgan Stanley and Coca Cola

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

The idea behind Morgan Stanley and Coca Cola FEMSA SAB 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.