Correlation Between IONQ and Desktop Metal

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

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

Diversification Opportunities for IONQ and Desktop Metal

-0.06

Correlation Coefficient

IONQ  Desktop Metal

Good diversification

The 3 months correlation between IONQ and Desktop is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding IONQ Inc and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal and IONQ 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 IONQ 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 IONQ i.e., IONQ and Desktop Metal go up and down completely randomly.

Pair Corralation between IONQ and Desktop Metal

Given the investment horizon of 90 days IONQ Inc is expected to generate 0.83 times more return on investment than Desktop Metal. However, IONQ Inc is 1.2 times less risky than Desktop Metal. It trades about 0.06 of its potential returns per unit of risk. Desktop Metal is currently generating about 0.02 per unit of risk. If you would invest  1,376  in IONQ Inc on January 25, 2025 and sell it today you would earn a total of  1,514  from holding IONQ Inc or generate 110.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.42%
Values	Daily Returns

IONQ Inc  vs.  Desktop Metal

IONQ Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days IONQ Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Desktop Metal

Risk-Adjusted Performance

Good

Over the last 90 days Desktop Metal has generated negative risk-adjusted returns adding no value to investors with long positions. 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 IONQ and Desktop Metal

The main advantage of trading using opposite IONQ and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IONQ 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 IONQ 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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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.