Correlation Between Desjardins and Desjardins Canadian

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

By analyzing existing cross correlation between Desjardins 1 5 Year and Desjardins Canadian Preferred, you can compare the effects of market volatilities on Desjardins and Desjardins Canadian 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 with a short position of Desjardins Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desjardins and Desjardins Canadian.

Diversification Opportunities for Desjardins and Desjardins Canadian

0.61

Correlation Coefficient

Desjardins  Desjardins Canadian

Poor diversification

The 3 months correlation between Desjardins and Desjardins is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins 1 5 Year and Desjardins Canadian Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins Canadian and Desjardins 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 1 5 Year are associated (or correlated) with Desjardins Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins Canadian has no effect on the direction of Desjardins i.e., Desjardins and Desjardins Canadian go up and down completely randomly.

Pair Corralation between Desjardins and Desjardins Canadian

Assuming the 90 days trading horizon Desjardins is expected to generate 2.66 times less return on investment than Desjardins Canadian. But when comparing it to its historical volatility, Desjardins 1 5 Year is 3.33 times less risky than Desjardins Canadian. It trades about 0.1 of its potential returns per unit of risk. Desjardins Canadian Preferred is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,896  in Desjardins Canadian Preferred on September 16, 2024 and sell it today you would earn a total of  58.00  from holding Desjardins Canadian Preferred or generate 3.06% return on investment over 90 days.

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

Desjardins 1 5 Year  vs.  Desjardins Canadian Preferred

Desjardins 1 5

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins 1 5 Year are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Desjardins is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Desjardins Canadian

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins Canadian Preferred are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Desjardins Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Desjardins and Desjardins Canadian

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

The idea behind Desjardins 1 5 Year and Desjardins Canadian Preferred 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.