Correlation Between Morgan Stanley and CIBC Active

Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and CIBC Active 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 CIBC Active 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 CIBC Active Investment, you can compare the effects of market volatilities on Morgan Stanley and CIBC Active 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 CIBC Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and CIBC Active.

Diversification Opportunities for Morgan Stanley and CIBC Active

-0.23

Correlation Coefficient

Morgan Stanley  CIBC Active

Very good diversification

The 3 months correlation between Morgan and CIBC is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and CIBC Active Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIBC Active Investment 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 CIBC Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIBC Active Investment has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and CIBC Active go up and down completely randomly.

Pair Corralation between Morgan Stanley and CIBC Active

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the CIBC Active. In addition to that, Morgan Stanley is 2.85 times more volatile than CIBC Active Investment. It trades about -0.01 of its total potential returns per unit of risk. CIBC Active Investment is currently generating about 0.03 per unit of volatility. If you would invest  2,006  in CIBC Active Investment on December 28, 2024 and sell it today you would earn a total of  13.00  from holding CIBC Active Investment or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Morgan Stanley Direct  vs.  CIBC Active Investment

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

CIBC Active Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CIBC Active Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CIBC Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and CIBC Active

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

The idea behind Morgan Stanley Direct and CIBC Active Investment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.