Correlation Between Desktop Metal and Amphenol

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

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

Diversification Opportunities for Desktop Metal and Amphenol

0.74

Correlation Coefficient

Desktop Metal  Amphenol

Poor diversification

The 3 months correlation between Desktop and Amphenol is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Desktop Metal and Amphenol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amphenol 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 Amphenol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amphenol has no effect on the direction of Desktop Metal i.e., Desktop Metal and Amphenol go up and down completely randomly.

Pair Corralation between Desktop Metal and Amphenol

Allowing for the 90-day total investment horizon Desktop Metal is expected to generate 1.33 times less return on investment than Amphenol. In addition to that, Desktop Metal is 4.89 times more volatile than Amphenol. It trades about 0.04 of its total potential returns per unit of risk. Amphenol is currently generating about 0.25 per unit of volatility. If you would invest  11,405  in Amphenol on January 31, 2024 and sell it today you would earn a total of  808.00  from holding Amphenol or generate 7.08% return on investment over 90 days.

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

Desktop Metal  vs.  Amphenol

Desktop Metal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Desktop Metal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Desktop Metal displayed solid returns over the last few months and may actually be approaching a breakup point.

Amphenol

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amphenol are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Amphenol demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Desktop Metal and Amphenol

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

The idea behind Desktop Metal and Amphenol 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.