Correlation Between SigmaTron International and Desktop Metal

Can any of the company-specific risk be diversified away by investing in both SigmaTron 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 SigmaTron 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 SigmaTron International and Desktop Metal, you can compare the effects of market volatilities on SigmaTron 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 SigmaTron International with a short position of Desktop Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of SigmaTron International and Desktop Metal.

Diversification Opportunities for SigmaTron International and Desktop Metal

0.35

Correlation Coefficient

SigmaTron International  Desktop Metal

Weak diversification

The 3 months correlation between SigmaTron and Desktop is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SigmaTron International and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and SigmaTron 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 SigmaTron International 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 SigmaTron International i.e., SigmaTron International and Desktop Metal go up and down completely randomly.

Pair Corralation between SigmaTron International and Desktop Metal

Given the investment horizon of 90 days SigmaTron International is expected to under-perform the Desktop Metal. In addition to that, SigmaTron International is 1.06 times more volatile than Desktop Metal. It trades about -0.01 of its total potential returns per unit of risk. Desktop Metal is currently generating about 0.0 per unit of volatility. If you would invest  427.00  in Desktop Metal on September 2, 2024 and sell it today you would lose (11.00) from holding Desktop Metal or give up 2.58% of portfolio value over 90 days.

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

SigmaTron International  vs.  Desktop Metal

SigmaTron International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SigmaTron International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, SigmaTron International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 SigmaTron International and Desktop Metal

The main advantage of trading using opposite SigmaTron International and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SigmaTron 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 SigmaTron International 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.