Correlation Between Descartes Systems and E2open Parent

Can any of the company-specific risk be diversified away by investing in both Descartes Systems and E2open Parent 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 E2open Parent 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 E2open Parent Holdings, you can compare the effects of market volatilities on Descartes Systems and E2open Parent 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 E2open Parent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Descartes Systems and E2open Parent.

Diversification Opportunities for Descartes Systems and E2open Parent

-0.75

Correlation Coefficient

Descartes Systems  E2open Parent

Pay attention - limited upside

The 3 months correlation between Descartes and E2open is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and E2open Parent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E2open Parent Holdings 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 E2open Parent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E2open Parent Holdings has no effect on the direction of Descartes Systems i.e., Descartes Systems and E2open Parent go up and down completely randomly.

Pair Corralation between Descartes Systems and E2open Parent

Given the investment horizon of 90 days Descartes Systems Group is expected to generate 0.52 times more return on investment than E2open Parent. However, Descartes Systems Group is 1.91 times less risky than E2open Parent. It trades about 0.34 of its potential returns per unit of risk. E2open Parent Holdings is currently generating about 0.03 per unit of risk. If you would invest  10,627  in Descartes Systems Group on September 2, 2024 and sell it today you would earn a total of  1,060  from holding Descartes Systems Group or generate 9.97% 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.  E2open Parent Holdings

Descartes Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Descartes Systems showed solid returns over the last few months and may actually be approaching a breakup point.

E2open Parent Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E2open Parent Holdings 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 basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Descartes Systems and E2open Parent

The main advantage of trading using opposite Descartes Systems and E2open Parent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Descartes Systems position performs unexpectedly, E2open Parent 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 E2open Parent will offset losses from the drop in E2open Parent's long position.

The idea behind Descartes Systems Group and E2open Parent Holdings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.