Correlation Between Morgan Stanley and Christian Dior

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

Diversification Opportunities for Morgan Stanley and Christian Dior

-0.52

Correlation Coefficient

Morgan Stanley  Christian Dior

Excellent diversification

The 3 months correlation between Morgan and Christian is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and Christian Dior SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Christian Dior SE 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 Christian Dior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Christian Dior SE has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Christian Dior go up and down completely randomly.

Pair Corralation between Morgan Stanley and Christian Dior

Given the investment horizon of 90 days Morgan Stanley is expected to generate 2.73 times less return on investment than Christian Dior. But when comparing it to its historical volatility, Morgan Stanley Direct is 1.63 times less risky than Christian Dior. It trades about 0.07 of its potential returns per unit of risk. Christian Dior SE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  56,691  in Christian Dior SE on September 21, 2024 and sell it today you would earn a total of  2,902  from holding Christian Dior SE or generate 5.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Morgan Stanley Direct  vs.  Christian Dior SE

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

Christian Dior SE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Christian Dior SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Christian Dior is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Morgan Stanley and Christian Dior

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

The idea behind Morgan Stanley Direct and Christian Dior SE 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.