Correlation Between Descartes Systems and Aurora Mobile

Can any of the company-specific risk be diversified away by investing in both Descartes Systems and Aurora Mobile 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 Aurora Mobile 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 Aurora Mobile, you can compare the effects of market volatilities on Descartes Systems and Aurora Mobile 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 Aurora Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Descartes Systems and Aurora Mobile.

Diversification Opportunities for Descartes Systems and Aurora Mobile

0.14

Correlation Coefficient

Descartes Systems  Aurora Mobile

Average diversification

The 3 months correlation between Descartes and Aurora is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and Aurora Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Mobile 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 Aurora Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Mobile has no effect on the direction of Descartes Systems i.e., Descartes Systems and Aurora Mobile go up and down completely randomly.

Pair Corralation between Descartes Systems and Aurora Mobile

Given the investment horizon of 90 days Descartes Systems is expected to generate 2.73 times less return on investment than Aurora Mobile. But when comparing it to its historical volatility, Descartes Systems Group is 3.43 times less risky than Aurora Mobile. It trades about 0.08 of its potential returns per unit of risk. Aurora Mobile is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Aurora Mobile on January 25, 2024 and sell it today you would earn a total of  14.00  from holding Aurora Mobile or generate 4.67% return on investment over 90 days.

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

Descartes Systems Group  vs.  Aurora Mobile

Descartes Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 4 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Aurora Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Aurora Mobile is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Descartes Systems and Aurora Mobile

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

The idea behind Descartes Systems Group and Aurora Mobile 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.