Correlation Between 3D Systems and Desktop Metal

Can any of the company-specific risk be diversified away by investing in both 3D Systems 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 3D Systems and Desktop Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3D Systems and Desktop Metal, you can compare the effects of market volatilities on 3D Systems 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 3D Systems with a short position of Desktop Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3D Systems and Desktop Metal.

Diversification Opportunities for 3D Systems and Desktop Metal

-0.64

Correlation Coefficient

3D Systems  Desktop Metal

Excellent diversification

The 3 months correlation between DDD and Desktop is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding 3D Systems and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and 3D Systems 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 3D Systems 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 3D Systems i.e., 3D Systems and Desktop Metal go up and down completely randomly.

Pair Corralation between 3D Systems and Desktop Metal

Considering the 90-day investment horizon 3D Systems is expected to under-perform the Desktop Metal. But the stock apears to be less risky and, when comparing its historical volatility, 3D Systems is 1.37 times less risky than Desktop Metal. The stock trades about -0.09 of its potential returns per unit of risk. The Desktop Metal is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  182.00  in Desktop Metal on January 17, 2024 and sell it today you would lose (96.00) from holding Desktop Metal or give up 52.75% of portfolio value over 90 days.

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

3D Systems  vs.  Desktop Metal

3D Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3D Systems 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 fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Desktop Metal

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Desktop Metal are ranked lower than 8 (%) 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 3D Systems and Desktop Metal

The main advantage of trading using opposite 3D Systems and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3D Systems 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 3D Systems 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.