Correlation Between Desjardins and Desjardins American

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

By analyzing existing cross correlation between Desjardins RI Developed and Desjardins American Equity, you can compare the effects of market volatilities on Desjardins and Desjardins American 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 American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Desjardins and Desjardins American.

Diversification Opportunities for Desjardins and Desjardins American

-0.24

Correlation Coefficient

Desjardins  Desjardins American

Very good diversification

The 3 months correlation between Desjardins and Desjardins is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI Developed and Desjardins American Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desjardins American 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 RI Developed are associated (or correlated) with Desjardins American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desjardins American has no effect on the direction of Desjardins i.e., Desjardins and Desjardins American go up and down completely randomly.

Pair Corralation between Desjardins and Desjardins American

Assuming the 90 days trading horizon Desjardins RI Developed is expected to under-perform the Desjardins American. But the etf apears to be less risky and, when comparing its historical volatility, Desjardins RI Developed is 1.48 times less risky than Desjardins American. The etf trades about -0.22 of its potential returns per unit of risk. The Desjardins American Equity is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,476  in Desjardins American Equity on October 8, 2024 and sell it today you would lose (1.00) from holding Desjardins American Equity or give up 0.04% of portfolio value over 90 days.

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

Desjardins RI Developed  vs.  Desjardins American Equity

Desjardins RI Developed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Desjardins American

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins American Equity are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins American may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Desjardins and Desjardins American

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

The idea behind Desjardins RI Developed and Desjardins American Equity 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.