Correlation Between Descartes Systems and HubSpot

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

Diversification Opportunities for Descartes Systems and HubSpot

0.94

Correlation Coefficient

Descartes Systems  HubSpot

Almost no diversification

The 3 months correlation between Descartes and HubSpot is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and HubSpot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HubSpot 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 HubSpot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HubSpot has no effect on the direction of Descartes Systems i.e., Descartes Systems and HubSpot go up and down completely randomly.

Pair Corralation between Descartes Systems and HubSpot

Given the investment horizon of 90 days Descartes Systems is expected to generate 2.39 times less return on investment than HubSpot. But when comparing it to its historical volatility, Descartes Systems Group is 1.35 times less risky than HubSpot. It trades about 0.17 of its potential returns per unit of risk. HubSpot is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  49,576  in HubSpot on August 31, 2024 and sell it today you would earn a total of  22,734  from holding HubSpot or generate 45.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Descartes Systems Group  vs.  HubSpot

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 weak technical and fundamental indicators, Descartes Systems showed solid returns over the last few months and may actually be approaching a breakup point.

HubSpot

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HubSpot are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, HubSpot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Descartes Systems and HubSpot

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

The idea behind Descartes Systems Group and HubSpot 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.