Correlation Between Morgan Stanley and Copa Holdings

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

Diversification Opportunities for Morgan Stanley and Copa Holdings

-0.12

Correlation Coefficient

Morgan Stanley  Copa Holdings

Good diversification

The 3 months correlation between Morgan and Copa is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Copa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copa Holdings SA 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 Copa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copa Holdings SA has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Copa Holdings go up and down completely randomly.

Pair Corralation between Morgan Stanley and Copa Holdings

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Copa Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 1.89 times less risky than Copa Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Copa Holdings SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,612  in Copa Holdings SA on December 27, 2024 and sell it today you would earn a total of  985.00  from holding Copa Holdings SA or generate 11.44% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Copa Holdings SA

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

Copa Holdings SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copa Holdings SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Copa Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Morgan Stanley and Copa Holdings

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

The idea behind Morgan Stanley Direct and Copa Holdings SA 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.