Correlation Between Morgan Stanley and Citigroup
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and Citigroup 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 Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley and Citigroup, you can compare the effects of market volatilities on Morgan Stanley and Citigroup 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 Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and Citigroup.
Diversification Opportunities for Morgan Stanley and Citigroup
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morgan and Citigroup is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and Citigroup go up and down completely randomly.
Pair Corralation between Morgan Stanley and Citigroup
Allowing for the 90-day total investment horizon Morgan Stanley is expected to generate 2.24 times less return on investment than Citigroup. In addition to that, Morgan Stanley is 1.07 times more volatile than Citigroup. It trades about 0.07 of its total potential returns per unit of risk. Citigroup is currently generating about 0.17 per unit of volatility. If you would invest 5,276 in Citigroup on January 24, 2024 and sell it today you would earn a total of 819.00 from holding Citigroup or generate 15.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morgan Stanley vs. Citigroup
Performance |
| Timeline |
| Morgan Stanley |
| Citigroup |
Morgan Stanley and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morgan Stanley and Citigroup
The main advantage of trading using opposite Morgan Stanley and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.| Morgan Stanley vs. JPMorgan Chase Co | Morgan Stanley vs. Wells Fargo | Morgan Stanley vs. Citigroup | Morgan Stanley vs. American Express |
| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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