Correlation Between Descartes Systems and MF International

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

Diversification Opportunities for Descartes Systems and MF International

-0.31

Correlation Coefficient

Descartes Systems  MF International

Very good diversification

The 3 months correlation between Descartes and MFI is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and mF International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on mF International 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 MF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of mF International has no effect on the direction of Descartes Systems i.e., Descartes Systems and MF International go up and down completely randomly.

Pair Corralation between Descartes Systems and MF International

Given the investment horizon of 90 days Descartes Systems Group is expected to generate 0.24 times more return on investment than MF International. However, Descartes Systems Group is 4.15 times less risky than MF International. It trades about 0.2 of its potential returns per unit of risk. mF International Limited is currently generating about 0.03 per unit of risk. If you would invest  10,017  in Descartes Systems Group on September 18, 2024 and sell it today you would earn a total of  1,910  from holding Descartes Systems Group or generate 19.07% return on investment over 90 days.

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

Descartes Systems Group  vs.  mF International Limited

Descartes Systems

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 15 (%) 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.

mF International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in mF International Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, MF International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Descartes Systems and MF International

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

The idea behind Descartes Systems Group and mF International Limited 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.