Correlation Between Descartes Systems and Workiva

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

Diversification Opportunities for Descartes Systems and Workiva

0.96

Correlation Coefficient

Descartes Systems  Workiva

Almost no diversification

The 3 months correlation between Descartes and Workiva is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and Workiva in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workiva 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 Workiva. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workiva has no effect on the direction of Descartes Systems i.e., Descartes Systems and Workiva go up and down completely randomly.

Pair Corralation between Descartes Systems and Workiva

Given the investment horizon of 90 days Descartes Systems is expected to generate 1.65 times less return on investment than Workiva. But when comparing it to its historical volatility, Descartes Systems Group is 1.31 times less risky than Workiva. It trades about 0.18 of its potential returns per unit of risk. Workiva is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  7,481  in Workiva on September 1, 2024 and sell it today you would earn a total of  2,244  from holding Workiva or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Descartes Systems Group  vs.  Workiva

Descartes Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 14 (%) 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.

Workiva

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Workiva are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Workiva disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Descartes Systems and Workiva

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

The idea behind Descartes Systems Group and Workiva 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.