Correlation Between CAE and Descartes Systems
Can any of the company-specific risk be diversified away by investing in both CAE 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 CAE and Descartes Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAE Inc and Descartes Systems Group, you can compare the effects of market volatilities on CAE 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 CAE with a short position of Descartes Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAE and Descartes Systems.
Diversification Opportunities for CAE and Descartes Systems
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CAE and Descartes is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Descartes Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Descartes Systems and CAE 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 CAE Inc 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 CAE i.e., CAE and Descartes Systems go up and down completely randomly.
Pair Corralation between CAE and Descartes Systems
Assuming the 90 days trading horizon CAE is expected to generate 2.34 times less return on investment than Descartes Systems. In addition to that, CAE is 1.32 times more volatile than Descartes Systems Group. It trades about 0.04 of its total potential returns per unit of risk. Descartes Systems Group is currently generating about 0.11 per unit of volatility. If you would invest 9,952 in Descartes Systems Group on September 2, 2024 and sell it today you would earn a total of 6,558 from holding Descartes Systems Group or generate 65.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAE Inc vs. Descartes Systems Group
Performance |
| Timeline |
| CAE Inc |
| Descartes Systems |
CAE and Descartes Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAE and Descartes Systems
The main advantage of trading using opposite CAE and Descartes Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAE 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 CAE Inc 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.| Descartes Systems vs. Kinaxis | Descartes Systems vs. Enghouse Systems | Descartes Systems vs. Open Text Corp | Descartes Systems vs. Celestica |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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