Correlation Between Puffer and Morpho
Can any of the company-specific risk be diversified away by investing in both Puffer 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 Puffer and Morpho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Puffer and Morpho, you can compare the effects of market volatilities on Puffer 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 Puffer with a short position of Morpho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Puffer and Morpho.
Diversification Opportunities for Puffer and Morpho
Very weak diversification
The 3 months correlation between Puffer and Morpho is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Puffer and Morpho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morpho and Puffer 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 Puffer 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 Puffer i.e., Puffer and Morpho go up and down completely randomly.
Pair Corralation between Puffer and Morpho
Assuming the 90 days trading horizon Puffer is expected to generate 0.66 times more return on investment than Morpho. However, Puffer is 1.51 times less risky than Morpho. It trades about -0.24 of its potential returns per unit of risk. Morpho is currently generating about -0.18 per unit of risk. If you would invest 69.00 in Puffer on November 8, 2024 and sell it today you would lose (25.00) from holding Puffer or give up 36.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Puffer vs. Morpho
Performance |
| Timeline |
| Puffer |
| Morpho |
Puffer and Morpho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Puffer and Morpho
The main advantage of trading using opposite Puffer and Morpho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Puffer 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 Puffer 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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