Correlation Between Desjardins Sustainable and Mawer Equity

Can any of the company-specific risk be diversified away by investing in both Desjardins Sustainable and Mawer Equity 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 Desjardins Sustainable and Mawer Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Desjardins Sustainable Maximum and Mawer Equity A, you can compare the effects of market volatilities on Desjardins Sustainable and Mawer Equity 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 Desjardins Sustainable with a short position of Mawer Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desjardins Sustainable and Mawer Equity.

Diversification Opportunities for Desjardins Sustainable and Mawer Equity

0.92

Correlation Coefficient

Desjardins Sustainable  Mawer Equity

Almost no diversification

The 3 months correlation between Desjardins and Mawer is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins Sustainable Maximum and Mawer Equity A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mawer Equity A and Desjardins Sustainable 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 Desjardins Sustainable Maximum are associated (or correlated) with Mawer Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mawer Equity A has no effect on the direction of Desjardins Sustainable i.e., Desjardins Sustainable and Mawer Equity go up and down completely randomly.

Pair Corralation between Desjardins Sustainable and Mawer Equity

Assuming the 90 days trading horizon Desjardins Sustainable is expected to generate 1.44 times less return on investment than Mawer Equity. But when comparing it to its historical volatility, Desjardins Sustainable Maximum is 1.46 times less risky than Mawer Equity. It trades about 0.25 of its potential returns per unit of risk. Mawer Equity A is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9,465  in Mawer Equity A on September 4, 2024 and sell it today you would earn a total of  969.00  from holding Mawer Equity A or generate 10.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Desjardins Sustainable Maximum  vs.  Mawer Equity A

Desjardins Sustainable

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins Sustainable Maximum are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively weak forward-looking indicators, Desjardins Sustainable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mawer Equity A

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mawer Equity A are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, Mawer Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Desjardins Sustainable and Mawer Equity

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

The idea behind Desjardins Sustainable Maximum and Mawer Equity A 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.