Correlation Between Morgan Stanley and CVC Capital

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

Diversification Opportunities for Morgan Stanley and CVC Capital

0.05

Correlation Coefficient

Morgan Stanley  CVC Capital

Significant diversification

The 3 months correlation between Morgan and CVC is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and CVC Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Capital Partners 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 CVC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Capital Partners has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and CVC Capital go up and down completely randomly.

Pair Corralation between Morgan Stanley and CVC Capital

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.78 times less return on investment than CVC Capital. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.12 times less risky than CVC Capital. It trades about 0.03 of its potential returns per unit of risk. CVC Capital Partners is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,635  in CVC Capital Partners on December 5, 2024 and sell it today you would earn a total of  444.00  from holding CVC Capital Partners or generate 27.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.78%
Values	Daily Returns

Morgan Stanley Direct  vs.  CVC Capital Partners

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

CVC Capital Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVC Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Morgan Stanley and CVC Capital

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

The idea behind Morgan Stanley Direct and CVC Capital Partners 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.