Correlation Between Morgan Stanley and Unilever PLC

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

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

Diversification Opportunities for Morgan Stanley and Unilever PLC

-0.79

Correlation Coefficient

Morgan Stanley  Unilever PLC

Pay attention - limited upside

The 3 months correlation between Morgan and Unilever is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Unilever PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC ADR 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 Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC ADR has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Unilever PLC go up and down completely randomly.

Pair Corralation between Morgan Stanley and Unilever PLC

Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 2.51 times more return on investment than Unilever PLC. However, Morgan Stanley is 2.51 times more volatile than Unilever PLC ADR. It trades about 0.08 of its potential returns per unit of risk. Unilever PLC ADR is currently generating about -0.21 per unit of risk. If you would invest  11,781  in Morgan Stanley on October 6, 2024 and sell it today you would earn a total of  813.00  from holding Morgan Stanley or generate 6.9% return on investment over 90 days.

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

Morgan Stanley  vs.  Unilever PLC ADR

Morgan Stanley

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 10 (%) 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.

Unilever PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Morgan Stanley and Unilever PLC

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

The idea behind Morgan Stanley and Unilever PLC ADR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.