Correlation Between Desktop Metal and Kimball Electronics

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

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

Diversification Opportunities for Desktop Metal and Kimball Electronics

-0.06

Correlation Coefficient

Desktop Metal  Kimball Electronics

Good diversification

The 3 months correlation between Desktop and Kimball is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Kimball Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimball Electronics 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 Kimball Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimball Electronics has no effect on the direction of Desktop Metal i.e., Desktop Metal and Kimball Electronics go up and down completely randomly.

Pair Corralation between Desktop Metal and Kimball Electronics

Allowing for the 90-day total investment horizon Desktop Metal is expected to generate 7.47 times more return on investment than Kimball Electronics. However, Desktop Metal is 7.47 times more volatile than Kimball Electronics. It trades about 0.13 of its potential returns per unit of risk. Kimball Electronics is currently generating about -0.07 per unit of risk. If you would invest  232.00  in Desktop Metal on December 28, 2024 and sell it today you would earn a total of  252.00  from holding Desktop Metal or generate 108.62% 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.  Kimball Electronics

Desktop Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Desktop Metal are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Desktop Metal displayed solid returns over the last few months and may actually be approaching a breakup point.

Kimball Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kimball Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Desktop Metal and Kimball Electronics

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

The idea behind Desktop Metal and Kimball Electronics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.