Correlation Between CI Canadian and Descartes Systems

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

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

Diversification Opportunities for CI Canadian and Descartes Systems

0.91

Correlation Coefficient

CI Canadian  Descartes Systems

Almost no diversification

The 3 months correlation between CIC and Descartes is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CI Canadian Banks and Descartes Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Descartes Systems and CI Canadian 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 CI Canadian Banks 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 CI Canadian i.e., CI Canadian and Descartes Systems go up and down completely randomly.

Pair Corralation between CI Canadian and Descartes Systems

Assuming the 90 days trading horizon CI Canadian Banks is expected to generate 0.35 times more return on investment than Descartes Systems. However, CI Canadian Banks is 2.82 times less risky than Descartes Systems. It trades about -0.04 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  1,193  in CI Canadian Banks on December 27, 2024 and sell it today you would lose (22.00) from holding CI Canadian Banks or give up 1.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

CI Canadian Banks  vs.  Descartes Systems Group

CI Canadian Banks

Risk-Adjusted Performance

Very Weak

Over the last 90 days CI Canadian Banks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, CI Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Descartes Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Descartes Systems Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with CI Canadian and Descartes Systems

The main advantage of trading using opposite CI Canadian and Descartes Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CI Canadian 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 CI Canadian Banks 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.