Correlation Between Chuangs China and Morgan Stanley

Can any of the company-specific risk be diversified away by investing in both Chuangs China and Morgan Stanley 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 Chuangs China and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chuangs China Investments and Morgan Stanley, you can compare the effects of market volatilities on Chuangs China and Morgan Stanley 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 Chuangs China with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and Morgan Stanley.

Diversification Opportunities for Chuangs China and Morgan Stanley

0.58

Correlation Coefficient

Chuangs China  Morgan Stanley

Very weak diversification

The 3 months correlation between Chuangs and Morgan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Chuangs China 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 Chuangs China Investments are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Chuangs China i.e., Chuangs China and Morgan Stanley go up and down completely randomly.

Pair Corralation between Chuangs China and Morgan Stanley

Assuming the 90 days horizon Chuangs China is expected to generate 1.19 times less return on investment than Morgan Stanley. In addition to that, Chuangs China is 2.25 times more volatile than Morgan Stanley. It trades about 0.1 of its total potential returns per unit of risk. Morgan Stanley is currently generating about 0.27 per unit of volatility. If you would invest  9,442  in Morgan Stanley on April 20, 2025 and sell it today you would earn a total of  2,708  from holding Morgan Stanley or generate 28.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Chuangs China Investments  vs.  Morgan Stanley

Chuangs China Investments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chuangs China Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chuangs China reported solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Morgan Stanley reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chuangs China and Morgan Stanley

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

The idea behind Chuangs China Investments and Morgan Stanley 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 Global Correlations module to find global opportunities by holding instruments from different markets.