Correlation Between Morgan Stanley and CITIC Guoan

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

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

Diversification Opportunities for Morgan Stanley and CITIC Guoan

-0.51

Correlation Coefficient

Morgan Stanley  CITIC Guoan

Excellent diversification

The 3 months correlation between Morgan and CITIC is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and CITIC Guoan Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Guoan Information 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 Direct are associated (or correlated) with CITIC Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Guoan Information has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and CITIC Guoan go up and down completely randomly.

Pair Corralation between Morgan Stanley and CITIC Guoan

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the CITIC Guoan. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 3.05 times less risky than CITIC Guoan. The stock trades about -0.08 of its potential returns per unit of risk. The CITIC Guoan Information is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  302.00  in CITIC Guoan Information on December 3, 2024 and sell it today you would earn a total of  4.00  from holding CITIC Guoan Information or generate 1.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.5%
Values	Daily Returns

Morgan Stanley Direct  vs.  CITIC Guoan Information

Morgan Stanley Direct

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Stanley Direct has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Morgan Stanley is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

CITIC Guoan Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIC Guoan Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Morgan Stanley and CITIC Guoan

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

The idea behind Morgan Stanley Direct and CITIC Guoan Information 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 Global Correlations module to find global opportunities by holding instruments from different markets.