Correlation Between Advanced Health and Descartes Systems

Can any of the company-specific risk be diversified away by investing in both Advanced Health and Descartes 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 Advanced Health and Descartes Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Health Intelligence and Descartes Systems Group, you can compare the effects of market volatilities on Advanced Health and Descartes 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 Advanced Health with a short position of Descartes Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Health and Descartes Systems.

Diversification Opportunities for Advanced Health and Descartes Systems

-0.86

Correlation Coefficient

Advanced Health  Descartes Systems

Pay attention - limited upside

The 3 months correlation between Advanced and Descartes is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Health Intelligence and Descartes Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Descartes Systems and Advanced Health 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 Advanced Health Intelligence are associated (or correlated) with Descartes Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Descartes Systems has no effect on the direction of Advanced Health i.e., Advanced Health and Descartes Systems go up and down completely randomly.

Pair Corralation between Advanced Health and Descartes Systems

Assuming the 90 days horizon Advanced Health Intelligence is expected to generate 75.57 times more return on investment than Descartes Systems. However, Advanced Health is 75.57 times more volatile than Descartes Systems Group. It trades about 0.11 of its potential returns per unit of risk. Descartes Systems Group is currently generating about 0.09 per unit of risk. If you would invest  5.00  in Advanced Health Intelligence on September 26, 2024 and sell it today you would lose (4.60) from holding Advanced Health Intelligence or give up 92.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	88.93%
Values	Daily Returns

Advanced Health Intelligence  vs.  Descartes Systems Group

Advanced Health Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Health Intelligence has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Descartes Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Descartes Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Advanced Health and Descartes Systems

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

The idea behind Advanced Health Intelligence and Descartes Systems Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.