Correlation Between NMC and Morpho

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

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

Diversification Opportunities for NMC and Morpho

-0.24

Correlation Coefficient

NMC  Morpho

Very good diversification

The 3 months correlation between NMC and Morpho is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding NMC and Morpho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morpho and NMC 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 NMC 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 NMC i.e., NMC and Morpho go up and down completely randomly.

Pair Corralation between NMC and Morpho

Assuming the 90 days trading horizon NMC is expected to generate 0.25 times more return on investment than Morpho. However, NMC is 3.96 times less risky than Morpho. It trades about 0.02 of its potential returns per unit of risk. Morpho is currently generating about -0.03 per unit of risk. 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

NMC  vs.  Morpho

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.

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 NMC and Morpho

The main advantage of trading using opposite NMC and Morpho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMC 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 NMC 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.