Correlation Between Descartes Systems and Manhattan Associates

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

Diversification Opportunities for Descartes Systems and Manhattan Associates

0.27

Correlation Coefficient

Descartes Systems  Manhattan Associates

Modest diversification

The 3 months correlation between Descartes and Manhattan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and Manhattan Associates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manhattan Associates 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 Manhattan Associates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manhattan Associates has no effect on the direction of Descartes Systems i.e., Descartes Systems and Manhattan Associates go up and down completely randomly.

Pair Corralation between Descartes Systems and Manhattan Associates

Given the investment horizon of 90 days Descartes Systems Group is expected to generate 0.37 times more return on investment than Manhattan Associates. However, Descartes Systems Group is 2.74 times less risky than Manhattan Associates. It trades about -0.04 of its potential returns per unit of risk. Manhattan Associates is currently generating about -0.18 per unit of risk. If you would invest  11,687  in Descartes Systems Group on November 29, 2024 and sell it today you would lose (517.00) from holding Descartes Systems Group or give up 4.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Descartes Systems Group  vs.  Manhattan Associates

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.

Manhattan Associates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manhattan Associates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Descartes Systems and Manhattan Associates

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

The idea behind Descartes Systems Group and Manhattan Associates 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.