Correlation Between Desktop Metal and Blackline

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

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

Diversification Opportunities for Desktop Metal and Blackline

0.4

Correlation Coefficient

Desktop Metal  Blackline

Very weak diversification

The 3 months correlation between Desktop and Blackline is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Blackline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackline 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 Blackline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackline has no effect on the direction of Desktop Metal i.e., Desktop Metal and Blackline go up and down completely randomly.

Pair Corralation between Desktop Metal and Blackline

Allowing for the 90-day total investment horizon Desktop Metal is expected to generate 2.34 times more return on investment than Blackline. However, Desktop Metal is 2.34 times more volatile than Blackline. It trades about 0.07 of its potential returns per unit of risk. Blackline is currently generating about -0.03 per unit of risk. If you would invest  79.00  in Desktop Metal on January 25, 2024 and sell it today you would earn a total of  4.46  from holding Desktop Metal or generate 5.65% return on investment over 90 days.

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

Desktop Metal  vs.  Blackline

Desktop Metal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Desktop Metal are ranked lower than 7 (%) 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.

Blackline

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Blackline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Blackline is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Desktop Metal and Blackline

The main advantage of trading using opposite Desktop Metal and Blackline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desktop Metal position performs unexpectedly, Blackline 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 Blackline will offset losses from the drop in Blackline's long position.

The idea behind Desktop Metal and Blackline 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.