Correlation Between Morgan Stanley and Margo Caribe

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

Diversification Opportunities for Morgan Stanley and Margo Caribe

-0.79

Correlation Coefficient

Morgan Stanley  Margo Caribe

Pay attention - limited upside

The 3 months correlation between Morgan and Margo is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Margo Caribe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Margo Caribe 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 Margo Caribe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Margo Caribe has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Margo Caribe go up and down completely randomly.

Pair Corralation between Morgan Stanley and Margo Caribe

Given the investment horizon of 90 days Morgan Stanley is expected to generate 58.52 times less return on investment than Margo Caribe. But when comparing it to its historical volatility, Morgan Stanley Direct is 84.68 times less risky than Margo Caribe. It trades about 0.2 of its potential returns per unit of risk. Margo Caribe is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Margo Caribe on September 19, 2024 and sell it today you would lose (335.00) from holding Margo Caribe or give up 41.87% of portfolio value over 90 days.

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

Morgan Stanley Direct  vs.  Margo Caribe

Morgan Stanley Direct

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Direct are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Margo Caribe

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Margo Caribe are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Margo Caribe displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Margo Caribe

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

The idea behind Morgan Stanley Direct and Margo Caribe 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.