Correlation Between CVS Health and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both CVS Health 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 CVS Health and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Morgan Stanley, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Morgan Stanley.
Diversification Opportunities for CVS Health and Morgan Stanley
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVS and Morgan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and CVS Health 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 CVS Health 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 CVS Health i.e., CVS Health and Morgan Stanley go up and down completely randomly.
Pair Corralation between CVS Health and Morgan Stanley
Assuming the 90 days trading horizon CVS Health is expected to generate 1.8 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, CVS Health is 1.03 times less risky than Morgan Stanley. It trades about 0.11 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 234,578 in Morgan Stanley on September 2, 2024 and sell it today you would earn a total of 33,729 from holding Morgan Stanley or generate 14.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. Morgan Stanley
Performance |
| Timeline |
| CVS Health |
| Morgan Stanley |
CVS Health and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Morgan Stanley
The main advantage of trading using opposite CVS Health and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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.| CVS Health vs. DXC Technology | CVS Health vs. United Airlines Holdings | CVS Health vs. Genworth Financial | CVS Health vs. Deutsche Bank Aktiengesellschaft |
| Morgan Stanley vs. Micron Technology | Morgan Stanley vs. The Bank of | Morgan Stanley vs. Monster Beverage Corp | Morgan Stanley vs. Genworth Financial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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