Correlation Between Key Tronic and Desktop Metal

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

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

Diversification Opportunities for Key Tronic and Desktop Metal

0.93

Correlation Coefficient

Key Tronic  Desktop Metal

Almost no diversification

The 3 months correlation between Key and Desktop is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Key Tronic and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and Key Tronic 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 Key Tronic 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 Key Tronic i.e., Key Tronic and Desktop Metal go up and down completely randomly.

Pair Corralation between Key Tronic and Desktop Metal

Given the investment horizon of 90 days Key Tronic is expected to generate 0.39 times more return on investment than Desktop Metal. However, Key Tronic is 2.6 times less risky than Desktop Metal. It trades about -0.33 of its potential returns per unit of risk. Desktop Metal is currently generating about -0.18 per unit of risk. If you would invest  510.00  in Key Tronic on October 8, 2024 and sell it today you would lose (83.00) from holding Key Tronic or give up 16.27% of portfolio value over 90 days.

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

Key Tronic  vs.  Desktop Metal

Key Tronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Tronic 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 fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 unfluctuating 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.

Pair Trading with Key Tronic and Desktop Metal

The main advantage of trading using opposite Key Tronic and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Key Tronic 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 Key Tronic 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.