Correlation Between Descartes Systems and Canfor

Can any of the company-specific risk be diversified away by investing in both Descartes Systems and Canfor 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 Canfor 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 Canfor, you can compare the effects of market volatilities on Descartes Systems and Canfor 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 Canfor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Descartes Systems and Canfor.

Diversification Opportunities for Descartes Systems and Canfor

0.0

Correlation Coefficient

Descartes Systems  Canfor

Pay attention - limited upside

The 3 months correlation between Descartes and Canfor is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor 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 Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Descartes Systems i.e., Descartes Systems and Canfor go up and down completely randomly.

Pair Corralation between Descartes Systems and Canfor

Assuming the 90 days trading horizon Descartes Systems Group is expected to under-perform the Canfor. In addition to that, Descartes Systems is 1.09 times more volatile than Canfor. It trades about -0.1 of its total potential returns per unit of risk. Canfor is currently generating about -0.02 per unit of volatility. If you would invest  1,518  in Canfor on December 31, 2024 and sell it today you would lose (40.00) from holding Canfor or give up 2.64% of portfolio value over 90 days.

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

Descartes Systems Group  vs.  Canfor

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.

Canfor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canfor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Canfor 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 Canfor

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

The idea behind Descartes Systems Group and Canfor 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.