Correlation Between Zepp Health and Desktop Metal

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

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

Diversification Opportunities for Zepp Health and Desktop Metal

0.2

Correlation Coefficient

Zepp Health  Desktop Metal

Modest diversification

The 3 months correlation between Zepp and Desktop is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Zepp Health Corp and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and Zepp Health 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 Zepp Health Corp 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 Zepp Health i.e., Zepp Health and Desktop Metal go up and down completely randomly.

Pair Corralation between Zepp Health and Desktop Metal

Given the investment horizon of 90 days Zepp Health is expected to generate 8.97 times less return on investment than Desktop Metal. But when comparing it to its historical volatility, Zepp Health Corp is 3.8 times less risky than Desktop Metal. It trades about 0.05 of its potential returns per unit of risk. Desktop Metal is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  241.00  in Desktop Metal on December 27, 2024 and sell it today you would earn a total of  212.00  from holding Desktop Metal or generate 87.97% return on investment over 90 days.

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

Zepp Health Corp  vs.  Desktop Metal

Zepp Health Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zepp Health Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Zepp Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Desktop Metal

Risk-Adjusted Performance

OK

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 Zepp Health and Desktop Metal

The main advantage of trading using opposite Zepp Health and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zepp Health 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 Zepp Health Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.