Correlation Between Morgan Stanley and Capri Holdings

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

Diversification Opportunities for Morgan Stanley and Capri Holdings

-0.54

Correlation Coefficient

Morgan Stanley  Capri Holdings

Excellent diversification

The 3 months correlation between Morgan and Capri is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Capri Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Capri Holdings go up and down completely randomly.

Pair Corralation between Morgan Stanley and Capri Holdings

Given the investment horizon of 90 days Morgan Stanley Direct is expected to under-perform the Capri Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Morgan Stanley Direct is 3.08 times less risky than Capri Holdings. The stock trades about -0.08 of its potential returns per unit of risk. The Capri Holdings Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,095  in Capri Holdings Limited on October 12, 2024 and sell it today you would lose (40.00) from holding Capri Holdings Limited or give up 1.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

Morgan Stanley Direct  vs.  Capri Holdings Limited

Morgan Stanley Direct

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Morgan Stanley and Capri Holdings

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

The idea behind Morgan Stanley Direct and Capri Holdings Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.