Correlation Between Morgan Stanley and Ceconomy

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

Diversification Opportunities for Morgan Stanley and Ceconomy

-0.17

Correlation Coefficient

Morgan Stanley  Ceconomy

Good diversification

The 3 months correlation between Morgan and Ceconomy is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Ceconomy AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceconomy AG ADR 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 Ceconomy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceconomy AG ADR has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Ceconomy go up and down completely randomly.

Pair Corralation between Morgan Stanley and Ceconomy

Given the investment horizon of 90 days Morgan Stanley is expected to generate 4.43 times less return on investment than Ceconomy. But when comparing it to its historical volatility, Morgan Stanley Direct is 3.55 times less risky than Ceconomy. It trades about 0.03 of its potential returns per unit of risk. Ceconomy AG ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Ceconomy AG ADR on September 22, 2024 and sell it today you would earn a total of  14.00  from holding Ceconomy AG ADR or generate 38.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.57%
Values	Daily Returns

Morgan Stanley Direct  vs.  Ceconomy AG ADR

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 inconsistent fundamental indicators, Morgan Stanley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ceconomy AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ceconomy AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Ceconomy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morgan Stanley and Ceconomy

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

The idea behind Morgan Stanley Direct and Ceconomy AG ADR 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.