Correlation Between Desktop Metal and Network 1

Can any of the company-specific risk be diversified away by investing in both Desktop Metal and Network 1 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 Network 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Desktop Metal and Network 1 Technologies, you can compare the effects of market volatilities on Desktop Metal and Network 1 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 Network 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desktop Metal and Network 1.

Diversification Opportunities for Desktop Metal and Network 1

0.15

Correlation Coefficient

Desktop Metal  Network 1

Average diversification

The 3 months correlation between Desktop and Network is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Network 1 Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network 1 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 Network 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network 1 Technologies has no effect on the direction of Desktop Metal i.e., Desktop Metal and Network 1 go up and down completely randomly.

Pair Corralation between Desktop Metal and Network 1

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Network 1. In addition to that, Desktop Metal is 1.97 times more volatile than Network 1 Technologies. It trades about -0.24 of its total potential returns per unit of risk. Network 1 Technologies is currently generating about -0.05 per unit of volatility. If you would invest  145.00  in Network 1 Technologies on September 26, 2024 and sell it today you would lose (11.00) from holding Network 1 Technologies or give up 7.59% 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.  Network 1 Technologies

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.

Network 1 Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network 1 Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Desktop Metal and Network 1

The main advantage of trading using opposite Desktop Metal and Network 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Desktop Metal position performs unexpectedly, Network 1 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 Network 1 will offset losses from the drop in Network 1's long position.

The idea behind Desktop Metal and Network 1 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.