Correlation Between Desktop Metal and Velo3D

Can any of the company-specific risk be diversified away by investing in both Desktop Metal and Velo3D 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 Velo3D into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Desktop Metal and Velo3D Inc, you can compare the effects of market volatilities on Desktop Metal and Velo3D 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 Velo3D. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desktop Metal and Velo3D.

Diversification Opportunities for Desktop Metal and Velo3D

-0.19

Correlation Coefficient

Desktop Metal  Velo3D

Good diversification

The 3 months correlation between Desktop and Velo3D is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Velo3D Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Velo3D Inc 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 Velo3D. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Velo3D Inc has no effect on the direction of Desktop Metal i.e., Desktop Metal and Velo3D go up and down completely randomly.

Pair Corralation between Desktop Metal and Velo3D

If you would invest  97.00  in Velo3D Inc on August 24, 2024 and sell it today you would earn a total of  0.00  from holding Velo3D Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.35%
Values	Daily Returns

Desktop Metal  vs.  Velo3D Inc

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 very healthy primary indicators, Desktop Metal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Velo3D Inc

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Velo3D Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain essential indicators, Velo3D exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Desktop Metal and Velo3D

The main advantage of trading using opposite Desktop Metal and Velo3D positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desktop Metal position performs unexpectedly, Velo3D 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 Velo3D will offset losses from the drop in Velo3D's long position.

The idea behind Desktop Metal and Velo3D Inc 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.