Correlation Between Kingsoft Cloud and Descartes Systems

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

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

Diversification Opportunities for Kingsoft Cloud and Descartes Systems

0.57

Correlation Coefficient

Kingsoft Cloud  Descartes Systems

Very weak diversification

The 3 months correlation between Kingsoft and Descartes is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kingsoft Cloud HoldingsLtd and Descartes Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Descartes Systems and Kingsoft Cloud 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 Kingsoft Cloud HoldingsLtd are associated (or correlated) with Descartes Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Descartes Systems has no effect on the direction of Kingsoft Cloud i.e., Kingsoft Cloud and Descartes Systems go up and down completely randomly.

Pair Corralation between Kingsoft Cloud and Descartes Systems

Allowing for the 90-day total investment horizon Kingsoft Cloud HoldingsLtd is expected to generate 3.59 times more return on investment than Descartes Systems. However, Kingsoft Cloud is 3.59 times more volatile than Descartes Systems Group. It trades about 0.02 of its potential returns per unit of risk. Descartes Systems Group is currently generating about 0.05 per unit of risk. If you would invest  401.00  in Kingsoft Cloud HoldingsLtd on January 24, 2024 and sell it today you would lose (118.00) from holding Kingsoft Cloud HoldingsLtd or give up 29.43% of portfolio value over 90 days.

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

Kingsoft Cloud HoldingsLtd  vs.  Descartes Systems Group

Kingsoft Cloud Holdi

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kingsoft Cloud HoldingsLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Kingsoft Cloud exhibited solid returns over the last few months and may actually be approaching a breakup point.

Descartes Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 2 (%) 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.

Pair Trading with Kingsoft Cloud and Descartes Systems

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

The idea behind Kingsoft Cloud HoldingsLtd and Descartes Systems Group 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 .