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 USA and Desjardins RI Global, 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

0.98

Correlation Coefficient

Desjardins  Desjardins

Almost no diversification

The 3 months correlation between Desjardins and Desjardins is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI USA and Desjardins RI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins RI Global 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 USA 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 Global 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 1.04 times less return on investment than Desjardins. But when comparing it to its historical volatility, Desjardins RI USA is 1.01 times less risky than Desjardins. It trades about 0.31 of its potential returns per unit of risk. Desjardins RI Global is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  2,795  in Desjardins RI Global on September 12, 2024 and sell it today you would earn a total of  401.00  from holding Desjardins RI Global or generate 14.35% 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 USA  vs.  Desjardins RI Global

Desjardins RI USA

Risk-Adjusted Performance

24 of 100

Strong

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.

Desjardins RI Global

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI Global are ranked lower than 25 (%) 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 USA and Desjardins RI Global 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.