Correlation Between Desktop Metal and Evolv Technologies

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

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

Diversification Opportunities for Desktop Metal and Evolv Technologies

0.92

Correlation Coefficient

Desktop Metal  Evolv Technologies

Almost no diversification

The 3 months correlation between Desktop and Evolv is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Evolv Technologies Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolv Technologies and Desktop Metal 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 Desktop Metal are associated (or correlated) with Evolv Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolv Technologies has no effect on the direction of Desktop Metal i.e., Desktop Metal and Evolv Technologies go up and down completely randomly.

Pair Corralation between Desktop Metal and Evolv Technologies

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Evolv Technologies. In addition to that, Desktop Metal is 2.55 times more volatile than Evolv Technologies Holdings. It trades about -0.1 of its total potential returns per unit of risk. Evolv Technologies Holdings is currently generating about -0.16 per unit of volatility. If you would invest  287.00  in Evolv Technologies Holdings on March 28, 2024 and sell it today you would lose (39.00) from holding Evolv Technologies Holdings or give up 13.59% of portfolio value over 90 days.

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

Desktop Metal  vs.  Evolv Technologies Holdings

Desktop Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Desktop Metal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Evolv Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolv Technologies Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly stable which may send shares a bit higher in July 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Desktop Metal and Evolv Technologies

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

The idea behind Desktop Metal and Evolv Technologies Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.