Can any of the company-specific risk be diversified away by investing in both Desktop Metal and Akoustis Technologies 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 Desktop Metal and Akoustis Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Desktop Metal and Akoustis Technologies, you can compare the effects of market volatilities on Desktop Metal and Akoustis Technologies 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 Desktop Metal with a short position of Akoustis Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desktop Metal and Akoustis Technologies.
Diversification Opportunities for Desktop Metal and Akoustis Technologies
The 3 months correlation between Desktop and Akoustis is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Akoustis Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akoustis Technologies and Desktop Metal 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 Desktop Metal are associated (or correlated) with Akoustis Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akoustis Technologies has no effect on the direction of Desktop Metal i.e., Desktop Metal and Akoustis Technologies go up and down completely randomly.
Pair Corralation between Desktop Metal and Akoustis Technologies
Allowing for the 90-day total investment horizon Desktop Metal is expected to generate 1.14 times more return on investment than Akoustis Technologies. However, Desktop Metal is 1.14 times more volatile than Akoustis Technologies. It trades about -0.04 of its potential returns per unit of risk. Akoustis Technologies is currently generating about -0.07 per unit of risk. If you would invest 581.00 in Desktop Metal on September 1, 2023 and sell it today you would lose (516.00) from holding Desktop Metal or give up 88.81% of portfolio value over 90 days.
Over the last 90 days Desktop Metal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in December 2023. The recent disarray may also be a sign of long period up-swing for the firm insiders.
Over the last 90 days Akoustis Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2023. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Desktop Metal and Akoustis Technologies Volatility Contrast
Predicted Return Density
Pair Trading with Desktop Metal and Akoustis Technologies
The main advantage of trading using opposite Desktop Metal and Akoustis Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desktop Metal position performs unexpectedly, Akoustis Technologies 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 Akoustis Technologies will offset losses from the drop in Akoustis Technologies' long position.
The idea behind Desktop Metal and Akoustis Technologies 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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