Correlation Between Daily Journal and Descartes Systems

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

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

Diversification Opportunities for Daily Journal and Descartes Systems

0.07

Correlation Coefficient

Daily Journal  Descartes Systems

Significant diversification

The 3 months correlation between Daily and Descartes is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Daily Journal Corp and Descartes Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Descartes Systems and Daily Journal 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 Daily Journal Corp 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 Daily Journal i.e., Daily Journal and Descartes Systems go up and down completely randomly.

Pair Corralation between Daily Journal and Descartes Systems

Given the investment horizon of 90 days Daily Journal Corp is expected to generate 1.62 times more return on investment than Descartes Systems. However, Daily Journal is 1.62 times more volatile than Descartes Systems Group. It trades about 0.04 of its potential returns per unit of risk. Descartes Systems Group is currently generating about 0.06 per unit of risk. If you would invest  27,205  in Daily Journal Corp on November 29, 2024 and sell it today you would earn a total of  11,158  from holding Daily Journal Corp or generate 41.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Daily Journal Corp  vs.  Descartes Systems Group

Daily Journal Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daily Journal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 fairly strong technical and fundamental indicators, Descartes Systems is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daily Journal and Descartes Systems

The main advantage of trading using opposite Daily Journal and Descartes Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daily Journal 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 Daily Journal Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.