Correlation Between Apple and Desktop Metal

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Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Desktop Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Desktop Metal, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Desktop Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Desktop Metal.

Diversification Opportunities for Apple and Desktop Metal

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Apple and Desktop is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and Apple 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 Apple Inc 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 Apple i.e., Apple and Desktop Metal go up and down completely randomly.

Pair Corralation between Apple and Desktop Metal

Given the investment horizon of 90 days Apple Inc is expected to generate 0.44 times more return on investment than Desktop Metal. However, Apple Inc is 2.27 times less risky than Desktop Metal. It trades about 0.13 of its potential returns per unit of risk. Desktop Metal is currently generating about -0.14 per unit of risk. If you would invest  13,892  in Apple Inc on September 6, 2022 and sell it today you would earn a total of  965.00  from holding Apple Inc or generate 6.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Apple Inc  vs.  Desktop Metal

 Performance (%) 
       Timeline  
Apple Inc 
Apple Performance
0 of 100
Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Apple is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

Desktop Metal 
Desktop Performance
0 of 100
Over the last 90 days Desktop Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's primary indicators remain relatively steady which may send shares a bit higher in January 2023. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Desktop Price Channel

Apple and Desktop Metal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Desktop Metal

The main advantage of trading using opposite Apple and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.
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The idea behind Apple Inc 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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