Correlation Between Descartes Systems and Uber Technologies

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

Diversification Opportunities for Descartes Systems and Uber Technologies

-0.71

Correlation Coefficient

Descartes Systems  Uber Technologies

Pay attention - limited upside

The 3 months correlation between Descartes and Uber is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Descartes Systems i.e., Descartes Systems and Uber Technologies go up and down completely randomly.

Pair Corralation between Descartes Systems and Uber Technologies

Given the investment horizon of 90 days Descartes Systems Group is expected to generate 0.5 times more return on investment than Uber Technologies. However, Descartes Systems Group is 2.01 times less risky than Uber Technologies. It trades about -0.09 of its potential returns per unit of risk. Uber Technologies is currently generating about -0.28 per unit of risk. If you would invest  11,725  in Descartes Systems Group on September 24, 2024 and sell it today you would lose (310.00) from holding Descartes Systems Group or give up 2.64% of portfolio value over 90 days.

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

Descartes Systems Group  vs.  Uber Technologies

Descartes Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Descartes Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Uber Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Descartes Systems and Uber Technologies

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

The idea behind Descartes Systems Group and Uber Technologies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.