Correlation Between Descartes Systems and CerenceInc

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

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

Diversification Opportunities for Descartes Systems and CerenceInc

-0.76

Correlation Coefficient

Descartes Systems  CerenceInc

Pay attention - limited upside

The 3 months correlation between Descartes and CerenceInc is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and CerenceInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CerenceInc and Descartes Systems 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 Descartes Systems Group are associated (or correlated) with CerenceInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CerenceInc has no effect on the direction of Descartes Systems i.e., Descartes Systems and CerenceInc go up and down completely randomly.

Pair Corralation between Descartes Systems and CerenceInc

Given the investment horizon of 90 days Descartes Systems Group is expected to generate 0.17 times more return on investment than CerenceInc. However, Descartes Systems Group is 6.02 times less risky than CerenceInc. It trades about -0.1 of its potential returns per unit of risk. CerenceInc is currently generating about -0.35 per unit of risk. If you would invest  9,485  in Descartes Systems Group on March 2, 2024 and sell it today you would lose (385.00) from holding Descartes Systems Group or give up 4.06% of portfolio value over 90 days.

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

Descartes Systems Group  vs.  CerenceInc

Descartes Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Descartes Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

CerenceInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CerenceInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Descartes Systems and CerenceInc

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

The idea behind Descartes Systems Group and CerenceInc 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 .