Correlation Between Extreme Networks and Desktop Metal

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

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

Diversification Opportunities for Extreme Networks and Desktop Metal

-0.6

Correlation Coefficient

Extreme Networks  Desktop Metal

Excellent diversification

The 3 months correlation between Extreme and Desktop is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Extreme Networks and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and Extreme Networks 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 Extreme Networks 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 Extreme Networks i.e., Extreme Networks and Desktop Metal go up and down completely randomly.

Pair Corralation between Extreme Networks and Desktop Metal

Given the investment horizon of 90 days Extreme Networks is expected to generate 6.34 times less return on investment than Desktop Metal. But when comparing it to its historical volatility, Extreme Networks is 2.87 times less risky than Desktop Metal. It trades about 0.02 of its potential returns per unit of risk. Desktop Metal is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Desktop Metal on February 3, 2024 and sell it today you would earn a total of  1.52  from holding Desktop Metal or generate 1.81% return on investment over 90 days.

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

Extreme Networks  vs.  Desktop Metal

Extreme Networks

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 unfluctuating primary indicators, Desktop Metal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extreme Networks and Desktop Metal

The main advantage of trading using opposite Extreme Networks and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extreme Networks 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 Extreme Networks 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.