Correlation Between Descartes Systems and Cogeco Communications

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

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

Diversification Opportunities for Descartes Systems and Cogeco Communications

-0.67

Correlation Coefficient

Descartes Systems  Cogeco Communications

Excellent diversification

The 3 months correlation between Descartes and Cogeco is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and Cogeco Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogeco Communications and Descartes Systems 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 Descartes Systems Group are associated (or correlated) with Cogeco Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogeco Communications has no effect on the direction of Descartes Systems i.e., Descartes Systems and Cogeco Communications go up and down completely randomly.

Pair Corralation between Descartes Systems and Cogeco Communications

Assuming the 90 days trading horizon Descartes Systems Group is expected to under-perform the Cogeco Communications. In addition to that, Descartes Systems is 1.2 times more volatile than Cogeco Communications. It trades about -0.1 of its total potential returns per unit of risk. Cogeco Communications is currently generating about 0.04 per unit of volatility. If you would invest  6,635  in Cogeco Communications on December 31, 2024 and sell it today you would earn a total of  205.00  from holding Cogeco Communications or generate 3.09% return on investment over 90 days.

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

Descartes Systems Group  vs.  Cogeco Communications

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.

Cogeco Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cogeco Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Descartes Systems and Cogeco Communications

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

The idea behind Descartes Systems Group and Cogeco Communications 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.