Correlation Between Logitech International and Desktop Metal

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

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

Diversification Opportunities for Logitech International and Desktop Metal

0.49

Correlation Coefficient

Logitech International  Desktop Metal

Very weak diversification

The 3 months correlation between Logitech and Desktop is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Logitech International SA and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and Logitech International 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 Logitech International SA 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 Logitech International i.e., Logitech International and Desktop Metal go up and down completely randomly.

Pair Corralation between Logitech International and Desktop Metal

Given the investment horizon of 90 days Logitech International SA is expected to generate 0.37 times more return on investment than Desktop Metal. However, Logitech International SA is 2.7 times less risky than Desktop Metal. It trades about 0.04 of its potential returns per unit of risk. Desktop Metal is currently generating about -0.02 per unit of risk. If you would invest  5,904  in Logitech International SA on September 4, 2024 and sell it today you would earn a total of  2,319  from holding Logitech International SA or generate 39.28% return on investment over 90 days.

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

Logitech International SA  vs.  Desktop Metal

Logitech International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Logitech International SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Logitech International is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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 very healthy primary indicators, Desktop Metal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Logitech International and Desktop Metal

The main advantage of trading using opposite Logitech International and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Logitech International 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 Logitech International SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.