Correlation Between Desktop Metal and Cricut

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

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

Diversification Opportunities for Desktop Metal and Cricut

0.42

Correlation Coefficient

Desktop Metal  Cricut

Very weak diversification

The 3 months correlation between Desktop and Cricut is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Cricut Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cricut 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 Cricut. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cricut Inc has no effect on the direction of Desktop Metal i.e., Desktop Metal and Cricut go up and down completely randomly.

Pair Corralation between Desktop Metal and Cricut

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Cricut. In addition to that, Desktop Metal is 1.25 times more volatile than Cricut Inc. It trades about -0.28 of its total potential returns per unit of risk. Cricut Inc is currently generating about -0.02 per unit of volatility. If you would invest  617.00  in Cricut Inc on October 3, 2024 and sell it today you would lose (47.00) from holding Cricut Inc or give up 7.62% of portfolio value over 90 days.

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

Desktop Metal  vs.  Cricut 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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cricut Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cricut Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Cricut is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Desktop Metal and Cricut

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

The idea behind Desktop Metal and Cricut 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.