Correlation Between Cipher Mining and Morgan Stanley
Can any of the company-specific risk be diversified away by investing in both Cipher Mining and Morgan Stanley 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 Cipher Mining and Morgan Stanley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cipher Mining and Morgan Stanley, you can compare the effects of market volatilities on Cipher Mining and Morgan Stanley 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 Cipher Mining with a short position of Morgan Stanley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cipher Mining and Morgan Stanley.
Diversification Opportunities for Cipher Mining and Morgan Stanley
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cipher and Morgan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cipher Mining and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley and Cipher Mining 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 Cipher Mining are associated (or correlated) with Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Cipher Mining i.e., Cipher Mining and Morgan Stanley go up and down completely randomly.
Pair Corralation between Cipher Mining and Morgan Stanley
Assuming the 90 days horizon Cipher Mining is expected to generate 20.62 times more return on investment than Morgan Stanley. However, Cipher Mining is 20.62 times more volatile than Morgan Stanley. It trades about 0.18 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.29 per unit of risk. If you would invest 87.00 in Cipher Mining on September 2, 2024 and sell it today you would earn a total of 133.00 from holding Cipher Mining or generate 152.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cipher Mining vs. Morgan Stanley
Performance |
| Timeline |
| Cipher Mining |
| Morgan Stanley |
Cipher Mining and Morgan Stanley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cipher Mining and Morgan Stanley
The main advantage of trading using opposite Cipher Mining and Morgan Stanley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cipher Mining position performs unexpectedly, Morgan Stanley 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 Morgan Stanley will offset losses from the drop in Morgan Stanley's long position.The idea behind Cipher Mining and Morgan Stanley 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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