Correlation Between Desktop Metal and Dell Technologies

Can any of the company-specific risk be diversified away by investing in both Desktop Metal and Dell 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 Dell 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 Dell Technologies, you can compare the effects of market volatilities on Desktop Metal and Dell 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 Dell Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desktop Metal and Dell Technologies.

Diversification Opportunities for Desktop Metal and Dell Technologies

-0.04

Correlation Coefficient

Desktop Metal  Dell Technologies

Good diversification

The 3 months correlation between Desktop and Dell is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Desktop Metal i.e., Desktop Metal and Dell Technologies go up and down completely randomly.

Pair Corralation between Desktop Metal and Dell Technologies

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Dell Technologies. In addition to that, Desktop Metal is 1.0 times more volatile than Dell Technologies. It trades about -0.02 of its total potential returns per unit of risk. Dell Technologies is currently generating about 0.06 per unit of volatility. If you would invest  11,513  in Dell Technologies on August 30, 2024 and sell it today you would earn a total of  925.00  from holding Dell Technologies or generate 8.03% return on investment over 90 days.

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

Desktop Metal  vs.  Dell Technologies

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.

Dell Technologies

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Dell Technologies may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Desktop Metal and Dell Technologies

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

The idea behind Desktop Metal and Dell Technologies 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.