Correlation Between Morgan Stanley and Chuangs China

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

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

Diversification Opportunities for Morgan Stanley and Chuangs China

0.57

Correlation Coefficient

Morgan Stanley  Chuangs China

Very weak diversification

The 3 months correlation between Morgan and Chuangs is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Chuangs China Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chuangs China Investments 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 are associated (or correlated) with Chuangs China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chuangs China Investments has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Chuangs China go up and down completely randomly.

Pair Corralation between Morgan Stanley and Chuangs China

Assuming the 90 days horizon Morgan Stanley is expected to generate 0.44 times more return on investment than Chuangs China. However, Morgan Stanley is 2.25 times less risky than Chuangs China. It trades about 0.27 of its potential returns per unit of risk. Chuangs China Investments is currently generating about 0.12 per unit of risk. If you would invest  9,442  in Morgan Stanley on April 21, 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	100.0%
Values	Daily Returns

Morgan Stanley  vs.  Chuangs China Investments

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.

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 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chuangs China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morgan Stanley and Chuangs China

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

The idea behind Morgan Stanley and Chuangs China Investments 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.