Correlation Between Morgan Stanley and Compagnie

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

Diversification Opportunities for Morgan Stanley and Compagnie

0.66

Correlation Coefficient

Morgan Stanley  Compagnie

Poor diversification

The 3 months correlation between Morgan and Compagnie is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint 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 Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Compagnie go up and down completely randomly.

Pair Corralation between Morgan Stanley and Compagnie

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Compagnie. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 1.3 times less risky than Compagnie. The stock trades about -0.02 of its potential returns per unit of risk. The Compagnie de Saint Gobain is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,740  in Compagnie de Saint Gobain on October 2, 2024 and sell it today you would earn a total of  860.00  from holding Compagnie de Saint Gobain or generate 11.11% return on investment over 90 days.

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

Morgan Stanley Direct  vs.  Compagnie de Saint Gobain

Morgan Stanley Direct

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Compagnie de Saint

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Compagnie is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Morgan Stanley and Compagnie

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

The idea behind Morgan Stanley Direct and Compagnie de Saint Gobain 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..