Correlation Between Desktop Metal and Xperi Corp

Can any of the company-specific risk be diversified away by investing in both Desktop Metal and Xperi 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 Xperi 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 Xperi Corp, you can compare the effects of market volatilities on Desktop Metal and Xperi 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 Xperi Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desktop Metal and Xperi Corp.

Diversification Opportunities for Desktop Metal and Xperi Corp

-0.47

Correlation Coefficient

Desktop Metal  Xperi Corp

Very good diversification

The 3 months correlation between Desktop and Xperi is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Xperi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xperi 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 Xperi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xperi Corp has no effect on the direction of Desktop Metal i.e., Desktop Metal and Xperi Corp go up and down completely randomly.

Pair Corralation between Desktop Metal and Xperi Corp

Allowing for the 90-day total investment horizon Desktop Metal is expected to under-perform the Xperi Corp. In addition to that, Desktop Metal is 2.14 times more volatile than Xperi Corp. It trades about -0.02 of its total potential returns per unit of risk. Xperi Corp is currently generating about 0.01 per unit of volatility. If you would invest  1,085  in Xperi Corp on September 21, 2024 and sell it today you would lose (65.00) from holding Xperi Corp or give up 5.99% of portfolio value over 90 days.

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

Desktop Metal  vs.  Xperi 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 unfluctuating 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.

Xperi Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xperi Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Xperi Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Desktop Metal and Xperi Corp

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

The idea behind Desktop Metal and Xperi 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.