Correlation Between CARV and Morpho

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

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

Diversification Opportunities for CARV and Morpho

0.84

Correlation Coefficient

CARV  Morpho

Very poor diversification

The 3 months correlation between CARV and Morpho is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CARV and Morpho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morpho and CARV 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 CARV are associated (or correlated) with Morpho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morpho has no effect on the direction of CARV i.e., CARV and Morpho go up and down completely randomly.

Pair Corralation between CARV and Morpho

Assuming the 90 days trading horizon CARV is expected to under-perform the Morpho. In addition to that, CARV is 1.05 times more volatile than Morpho. It trades about -0.12 of its total potential returns per unit of risk. Morpho is currently generating about -0.08 per unit of volatility. If you would invest  278.00  in Morpho on December 23, 2024 and sell it today you would lose (143.00) from holding Morpho or give up 51.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

CARV  vs.  Morpho

CARV

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for CARV shareholders.

Morpho

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morpho has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for Morpho investors.

Pair Trading with CARV and Morpho

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

The idea behind CARV and Morpho 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.