Correlation Between Desktop Metal and Research Frontiers
Can any of the company-specific risk be diversified away by investing in both Desktop Metal and Research Frontiers 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 Research Frontiers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Desktop Metal and Research Frontiers Incorporated, you can compare the effects of market volatilities on Desktop Metal and Research Frontiers 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 Research Frontiers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desktop Metal and Research Frontiers.
Diversification Opportunities for Desktop Metal and Research Frontiers
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Desktop and Research is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Research Frontiers Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Research Frontiers 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 Research Frontiers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Research Frontiers has no effect on the direction of Desktop Metal i.e., Desktop Metal and Research Frontiers go up and down completely randomly.
Pair Corralation between Desktop Metal and Research Frontiers
Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Research Frontiers. In addition to that, Desktop Metal is 1.58 times more volatile than Research Frontiers Incorporated. It trades about -0.14 of its total potential returns per unit of risk. Research Frontiers Incorporated is currently generating about -0.13 per unit of volatility. If you would invest 214.00 in Research Frontiers Incorporated on September 3, 2024 and sell it today you would lose (19.00) from holding Research Frontiers Incorporated or give up 8.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Desktop Metal vs. Research Frontiers Incorporate
Performance |
| Timeline |
| Desktop Metal |
| Research Frontiers |
Desktop Metal and Research Frontiers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Desktop Metal and Research Frontiers
The main advantage of trading using opposite Desktop Metal and Research Frontiers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desktop Metal position performs unexpectedly, Research Frontiers 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 Research Frontiers will offset losses from the drop in Research Frontiers' long position.| Desktop Metal vs. Nano Dimension | Desktop Metal vs. 3D Systems | Desktop Metal vs. Markforged Holding Corp | Desktop Metal vs. Stratasys |
| Research Frontiers vs. Richardson Electronics | Research Frontiers vs. Orion Energy Systems | Research Frontiers vs. RF Industries | Research Frontiers vs. Reading International |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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