Correlation Between Morpho and MANTRA

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

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

Diversification Opportunities for Morpho and MANTRA

0.45

Correlation Coefficient

Morpho  MANTRA

Very weak diversification

The 3 months correlation between Morpho and MANTRA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Morpho and MANTRA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MANTRA 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 MANTRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MANTRA has no effect on the direction of Morpho i.e., Morpho and MANTRA go up and down completely randomly.

Pair Corralation between Morpho and MANTRA

Assuming the 90 days trading horizon Morpho is expected to generate 3.11 times less return on investment than MANTRA. But when comparing it to its historical volatility, Morpho is 1.63 times less risky than MANTRA. It trades about 0.05 of its potential returns per unit of risk. MANTRA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.28  in MANTRA on October 26, 2024 and sell it today you would earn a total of  344.72  from holding MANTRA or generate 8054.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	37.82%
Values	Daily Returns

Morpho  vs.  MANTRA

Morpho

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morpho are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Morpho sustained solid returns over the last few months and may actually be approaching a breakup point.

MANTRA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MANTRA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, MANTRA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morpho and MANTRA

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

The idea behind Morpho and MANTRA 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.