Correlation Between Morgan Stanley and Chayo Group

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

Diversification Opportunities for Morgan Stanley and Chayo Group

-0.87

Correlation Coefficient

Morgan Stanley  Chayo Group

Pay attention - limited upside

The 3 months correlation between Morgan and Chayo is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Chayo Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chayo Group Public 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 Chayo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chayo Group Public has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Chayo Group go up and down completely randomly.

Pair Corralation between Morgan Stanley and Chayo Group

Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 0.53 times more return on investment than Chayo Group. However, Morgan Stanley Direct is 1.88 times less risky than Chayo Group. It trades about 0.15 of its potential returns per unit of risk. Chayo Group Public is currently generating about -0.37 per unit of risk. If you would invest  1,948  in Morgan Stanley Direct on October 20, 2024 and sell it today you would earn a total of  195.00  from holding Morgan Stanley Direct or generate 10.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Morgan Stanley Direct  vs.  Chayo Group Public

Morgan Stanley Direct

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chayo Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chayo Group Public 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 fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Morgan Stanley and Chayo Group

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

The idea behind Morgan Stanley Direct and Chayo Group Public 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.