Can any of the company-specific risk be diversified away by investing in both Desktop Metal and Voxeljet 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 Voxeljet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Desktop Metal and Voxeljet Ag, you can compare the effects of market volatilities on Desktop Metal and Voxeljet 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 Voxeljet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desktop Metal and Voxeljet.
Diversification Opportunities for Desktop Metal and Voxeljet
The 3 months correlation between Desktop and Voxeljet is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Voxeljet Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voxeljet Ag 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 Voxeljet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voxeljet Ag has no effect on the direction of Desktop Metal i.e., Desktop Metal and Voxeljet go up and down completely randomly.
Pair Corralation between Desktop Metal and Voxeljet
Allowing for the 90-day total investment horizon Desktop Metal is expected to generate 1.02 times more return on investment than Voxeljet. However, Desktop Metal is 1.02 times more volatile than Voxeljet Ag. It trades about -0.09 of its potential returns per unit of risk. Voxeljet Ag is currently generating about -0.13 per unit of risk. If you would invest 154.00 in Desktop Metal on June 27, 2023 and sell it today you would lose (10.00) from holding Desktop Metal or give up 6.49% 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 inconsistent performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in October 2023. The recent disarray may also be a sign of long period up-swing for the firm insiders.
Over the last 90 days Voxeljet Ag 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 technical and fundamental indicators remain comparatively stable which may send shares a bit higher in October 2023. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
The main advantage of trading using opposite Desktop Metal and Voxeljet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desktop Metal position performs unexpectedly, Voxeljet 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 Voxeljet will offset losses from the drop in Voxeljet's long position.
The idea behind Desktop Metal and Voxeljet Ag 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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