Correlation Between Morgan Stanley and Cohen

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

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

Diversification Opportunities for Morgan Stanley and Cohen

0.77

Correlation Coefficient

Morgan Stanley  Cohen

Poor diversification

The 3 months correlation between Morgan and Cohen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Cohen Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Company 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 Cohen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Company has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Cohen go up and down completely randomly.

Pair Corralation between Morgan Stanley and Cohen

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 0.63 times more return on investment than Cohen. However, Morgan Stanley is 1.58 times less risky than Cohen. It trades about 0.22 of its potential returns per unit of risk. Cohen Company is currently generating about 0.12 per unit of risk. If you would invest  9,748  in Morgan Stanley on September 13, 2024 and sell it today you would earn a total of  3,043  from holding Morgan Stanley or generate 31.22% return on investment over 90 days.

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

Morgan Stanley  vs.  Cohen Company

Morgan Stanley

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cohen Company

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical indicators, Cohen displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Cohen

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

The idea behind Morgan Stanley and Cohen Company 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.