Correlation Between Descartes Systems and Bentley Systems

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

Diversification Opportunities for Descartes Systems and Bentley Systems

-0.39

Correlation Coefficient

Descartes Systems  Bentley Systems

Very good diversification

The 3 months correlation between Descartes and Bentley is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and Bentley Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bentley Systems 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 Bentley Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bentley Systems has no effect on the direction of Descartes Systems i.e., Descartes Systems and Bentley Systems go up and down completely randomly.

Pair Corralation between Descartes Systems and Bentley Systems

Given the investment horizon of 90 days Descartes Systems Group is expected to generate 0.94 times more return on investment than Bentley Systems. However, Descartes Systems Group is 1.06 times less risky than Bentley Systems. It trades about 0.17 of its potential returns per unit of risk. Bentley Systems is currently generating about -0.04 per unit of risk. If you would invest  10,303  in Descartes Systems Group on September 19, 2024 and sell it today you would earn a total of  1,622  from holding Descartes Systems Group or generate 15.74% return on investment over 90 days.

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

Descartes Systems Group  vs.  Bentley Systems

Descartes Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Descartes Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Bentley Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bentley Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bentley Systems is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Descartes Systems and Bentley Systems

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

The idea behind Descartes Systems Group and Bentley Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.