Correlation Between Morpho and NMC

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

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

Diversification Opportunities for Morpho and NMC

-0.24

Correlation Coefficient

Morpho  NMC

Very good diversification

The 3 months correlation between Morpho and NMC is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Morpho and NMC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMC and Morpho 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 Morpho are associated (or correlated) with NMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMC has no effect on the direction of Morpho i.e., Morpho and NMC go up and down completely randomly.

Pair Corralation between Morpho and NMC

Assuming the 90 days trading horizon Morpho is expected to under-perform the NMC. In addition to that, Morpho is 3.96 times more volatile than NMC. It trades about -0.03 of its total potential returns per unit of risk. NMC is currently generating about 0.02 per unit of volatility. If you would invest  101.00  in NMC on December 20, 2024 and sell it today you would earn a total of  1.00  from holding NMC or generate 0.99% return on investment over 90 days.

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

Morpho  vs.  NMC

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.

NMC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NMC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, NMC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Morpho and NMC

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

The idea behind Morpho and NMC 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.