Correlation Between Desktop Metal and Franklin Wireless

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

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

Diversification Opportunities for Desktop Metal and Franklin Wireless

0.15

Correlation Coefficient

Desktop Metal  Franklin Wireless

Average diversification

The 3 months correlation between Desktop and Franklin is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Franklin Wireless Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Wireless Corp 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 Franklin Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Wireless Corp has no effect on the direction of Desktop Metal i.e., Desktop Metal and Franklin Wireless go up and down completely randomly.

Pair Corralation between Desktop Metal and Franklin Wireless

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Franklin Wireless. In addition to that, Desktop Metal is 1.96 times more volatile than Franklin Wireless Corp. It trades about -0.29 of its total potential returns per unit of risk. Franklin Wireless Corp is currently generating about 0.03 per unit of volatility. If you would invest  423.00  in Franklin Wireless Corp on September 23, 2024 and sell it today you would earn a total of  7.00  from holding Franklin Wireless Corp or generate 1.65% return on investment over 90 days.

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

Desktop Metal  vs.  Franklin Wireless Corp

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

Franklin Wireless Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Wireless Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Franklin Wireless is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Desktop Metal and Franklin Wireless

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

The idea behind Desktop Metal and Franklin Wireless Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.