Correlation Between Trade Desk and Descartes Systems

Can any of the company-specific risk be diversified away by investing in both Trade Desk and Descartes Systems 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 Trade Desk and Descartes Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trade Desk and Descartes Systems Group, you can compare the effects of market volatilities on Trade Desk and Descartes Systems 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 Trade Desk with a short position of Descartes Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Desk and Descartes Systems.

Diversification Opportunities for Trade Desk and Descartes Systems

0.83

Correlation Coefficient

Trade Desk  Descartes Systems

Very poor diversification

The 3 months correlation between Trade and Descartes is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Trade Desk and Descartes Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Descartes Systems and Trade Desk 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 Trade Desk are associated (or correlated) with Descartes Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Descartes Systems has no effect on the direction of Trade Desk i.e., Trade Desk and Descartes Systems go up and down completely randomly.

Pair Corralation between Trade Desk and Descartes Systems

Considering the 90-day investment horizon Trade Desk is expected to under-perform the Descartes Systems. In addition to that, Trade Desk is 2.68 times more volatile than Descartes Systems Group. It trades about -0.21 of its total potential returns per unit of risk. Descartes Systems Group is currently generating about -0.1 per unit of volatility. If you would invest  11,411  in Descartes Systems Group on December 29, 2024 and sell it today you would lose (1,387) from holding Descartes Systems Group or give up 12.15% of portfolio value over 90 days.

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

Trade Desk  vs.  Descartes Systems Group

Trade Desk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trade Desk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest abnormal performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Trade Desk and Descartes Systems

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

The idea behind Trade Desk and Descartes Systems Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.