Correlation Between Desktop Metal and Valens

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

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

Diversification Opportunities for Desktop Metal and Valens

-0.44

Correlation Coefficient

Desktop Metal  Valens

Very good diversification

The 3 months correlation between Desktop and Valens is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Desktop Metal i.e., Desktop Metal and Valens go up and down completely randomly.

Pair Corralation between Desktop Metal and Valens

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Valens. But the stock apears to be less risky and, when comparing its historical volatility, Desktop Metal is 1.31 times less risky than Valens. The stock trades about -0.2 of its potential returns per unit of risk. The Valens is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  207.00  in Valens on October 4, 2024 and sell it today you would earn a total of  75.00  from holding Valens or generate 36.23% 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.  Valens

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.

Valens

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Valens displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Desktop Metal and Valens

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

The idea behind Desktop Metal and Valens 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..