Correlation Between Descartes Systems and CI Canada

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

Diversification Opportunities for Descartes Systems and CI Canada

0.95

Correlation Coefficient

Descartes Systems  CI Canada

Almost no diversification

The 3 months correlation between Descartes and FLI is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and CI Canada Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Canada Lifeco 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 CI Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Canada Lifeco has no effect on the direction of Descartes Systems i.e., Descartes Systems and CI Canada go up and down completely randomly.

Pair Corralation between Descartes Systems and CI Canada

Assuming the 90 days trading horizon Descartes Systems Group is expected to generate 1.32 times more return on investment than CI Canada. However, Descartes Systems is 1.32 times more volatile than CI Canada Lifeco. It trades about 0.23 of its potential returns per unit of risk. CI Canada Lifeco is currently generating about 0.18 per unit of risk. If you would invest  13,505  in Descartes Systems Group on September 2, 2024 and sell it today you would earn a total of  3,005  from holding Descartes Systems Group or generate 22.25% return on investment over 90 days.

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

Descartes Systems Group  vs.  CI Canada Lifeco

Descartes Systems

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Descartes Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

CI Canada Lifeco

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Lifeco are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, CI Canada may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Descartes Systems and CI Canada

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

The idea behind Descartes Systems Group and CI Canada Lifeco 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..