Correlation Between Radware and Desktop Metal

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

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

Diversification Opportunities for Radware and Desktop Metal

-0.24

Correlation Coefficient

Radware  Desktop Metal

Very good diversification

The 3 months correlation between Radware and Desktop is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Radware and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and Radware 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 Radware are associated (or correlated) with Desktop Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desktop Metal has no effect on the direction of Radware i.e., Radware and Desktop Metal go up and down completely randomly.

Pair Corralation between Radware and Desktop Metal

Given the investment horizon of 90 days Radware is expected to generate 0.53 times more return on investment than Desktop Metal. However, Radware is 1.89 times less risky than Desktop Metal. It trades about 0.05 of its potential returns per unit of risk. Desktop Metal is currently generating about -0.23 per unit of risk. If you would invest  2,179  in Radware on September 27, 2024 and sell it today you would earn a total of  112.00  from holding Radware or generate 5.14% return on investment over 90 days.

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

Radware  vs.  Desktop Metal

Radware

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Radware are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Radware may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Radware and Desktop Metal

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

The idea behind Radware and Desktop Metal 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .