Correlation Between Desjardins and Desjardins

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

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

Diversification Opportunities for Desjardins and Desjardins

0.99

Correlation Coefficient

Desjardins  Desjardins

No risk reduction

The 3 months correlation between Desjardins and Desjardins is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI Canada and Desjardins RI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI USA and Desjardins 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 Desjardins RI Canada are associated (or correlated) with Desjardins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins RI USA has no effect on the direction of Desjardins i.e., Desjardins and Desjardins go up and down completely randomly.

Pair Corralation between Desjardins and Desjardins

Assuming the 90 days trading horizon Desjardins is expected to generate 1.06 times less return on investment than Desjardins. But when comparing it to its historical volatility, Desjardins RI Canada is 1.3 times less risky than Desjardins. It trades about 0.38 of its potential returns per unit of risk. Desjardins RI USA is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  3,933  in Desjardins RI USA on September 5, 2024 and sell it today you would earn a total of  611.00  from holding Desjardins RI USA or generate 15.54% return on investment over 90 days.

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

Desjardins RI Canada  vs.  Desjardins RI USA

Desjardins RI Canada

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Canada are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins displayed solid returns over the last few months and may actually be approaching a breakup point.

Desjardins RI USA

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI USA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Desjardins and Desjardins

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

The idea behind Desjardins RI Canada and Desjardins RI USA 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.