Correlation Between Desktop Metal and M Tron

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

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

Diversification Opportunities for Desktop Metal and M Tron

-0.5

Correlation Coefficient

Desktop Metal  M Tron

Very good diversification

The 3 months correlation between Desktop and MPTI is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and M tron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M tron Industries 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 M Tron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M tron Industries has no effect on the direction of Desktop Metal i.e., Desktop Metal and M Tron go up and down completely randomly.

Pair Corralation between Desktop Metal and M Tron

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the M Tron. In addition to that, Desktop Metal is 1.03 times more volatile than M tron Industries. It trades about -0.09 of its total potential returns per unit of risk. M tron Industries is currently generating about 0.19 per unit of volatility. If you would invest  5,533  in M tron Industries on September 12, 2024 and sell it today you would earn a total of  1,038  from holding M tron Industries or generate 18.76% return on investment over 90 days.

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

Desktop Metal  vs.  M tron Industries

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 latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

M tron Industries

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in M tron Industries are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, M Tron demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Desktop Metal and M Tron

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

The idea behind Desktop Metal and M tron Industries 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.