Correlation Between DPCM Capital and Desktop Metal

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

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

Diversification Opportunities for DPCM Capital and Desktop Metal

0.02

Correlation Coefficient

DPCM Capital  Desktop Metal

Significant diversification

The 3 months correlation between DPCM and Desktop is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding DPCM Capital and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and DPCM Capital 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 DPCM Capital are associated (or correlated) with Desktop Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desktop Metal has no effect on the direction of DPCM Capital i.e., DPCM Capital and Desktop Metal go up and down completely randomly.

Pair Corralation between DPCM Capital and Desktop Metal

Given the investment horizon of 90 days DPCM Capital is expected to generate 0.59 times more return on investment than Desktop Metal. However, DPCM Capital is 1.69 times less risky than Desktop Metal. It trades about -0.34 of its potential returns per unit of risk. Desktop Metal is currently generating about -0.34 per unit of risk. If you would invest  171.00  in DPCM Capital on February 11, 2024 and sell it today you would lose (41.00) from holding DPCM Capital or give up 23.98% of portfolio value over 90 days.

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

DPCM Capital  vs.  Desktop Metal

DPCM Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DPCM Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DPCM Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Desktop Metal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Desktop Metal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Desktop Metal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DPCM Capital and Desktop Metal

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

The idea behind DPCM Capital and Desktop Metal 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.