Correlation Between Descartes Systems and VTEX

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

Diversification Opportunities for Descartes Systems and VTEX

-0.57

Correlation Coefficient

Descartes Systems  VTEX

Excellent diversification

The 3 months correlation between Descartes and VTEX is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and VTEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VTEX 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 VTEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VTEX has no effect on the direction of Descartes Systems i.e., Descartes Systems and VTEX go up and down completely randomly.

Pair Corralation between Descartes Systems and VTEX

Given the investment horizon of 90 days Descartes Systems Group is expected to generate 0.74 times more return on investment than VTEX. However, Descartes Systems Group is 1.35 times less risky than VTEX. It trades about 0.18 of its potential returns per unit of risk. VTEX is currently generating about -0.07 per unit of risk. If you would invest  9,875  in Descartes Systems Group on September 4, 2024 and sell it today you would earn a total of  1,722  from holding Descartes Systems Group or generate 17.44% return on investment over 90 days.

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

Descartes Systems Group  vs.  VTEX

Descartes Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 14 (%) 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.

VTEX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VTEX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Descartes Systems and VTEX

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

The idea behind Descartes Systems Group and VTEX 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.