Correlation Between Desktop Metal and Ciena Corp

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

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

Diversification Opportunities for Desktop Metal and Ciena Corp

-0.88

Correlation Coefficient

Desktop Metal  Ciena Corp

Pay attention - limited upside

The 3 months correlation between Desktop and Ciena is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena Corp 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 Ciena Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciena Corp has no effect on the direction of Desktop Metal i.e., Desktop Metal and Ciena Corp go up and down completely randomly.

Pair Corralation between Desktop Metal and Ciena Corp

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Ciena Corp. In addition to that, Desktop Metal is 1.34 times more volatile than Ciena Corp. It trades about -0.23 of its total potential returns per unit of risk. Ciena Corp is currently generating about 0.19 per unit of volatility. If you would invest  6,159  in Ciena Corp on September 30, 2024 and sell it today you would earn a total of  2,507  from holding Ciena Corp or generate 40.7% return on investment over 90 days.

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

Desktop Metal  vs.  Ciena Corp

Desktop Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Desktop Metal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ciena Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ciena Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Ciena Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Desktop Metal and Ciena Corp

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

The idea behind Desktop Metal and Ciena Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.