Correlation Between HP and Desktop Metal

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

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

Diversification Opportunities for HP and Desktop Metal

0.07

Correlation Coefficient

HP  Desktop Metal

Significant diversification

The 3 months correlation between HP and Desktop is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and HP 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 HP Inc are associated (or correlated) with Desktop Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desktop Metal has no effect on the direction of HP i.e., HP and Desktop Metal go up and down completely randomly.

Pair Corralation between HP and Desktop Metal

Considering the 90-day investment horizon HP Inc is expected to under-perform the Desktop Metal. But the stock apears to be less risky and, when comparing its historical volatility, HP Inc is 8.47 times less risky than Desktop Metal. The stock trades about -0.13 of its potential returns per unit of risk. The Desktop Metal is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  239.00  in Desktop Metal on December 26, 2024 and sell it today you would earn a total of  206.00  from holding Desktop Metal or generate 86.19% return on investment over 90 days.

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

HP Inc  vs.  Desktop Metal

HP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Desktop Metal

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Desktop Metal are ranked lower than 9 (%) 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.

Pair Trading with HP and Desktop Metal

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

The idea behind HP Inc and Desktop Metal 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 Commodity Directory module to find actively traded commodities issued by global exchanges.