Correlation Between Descartes Systems and PROS Holdings
Can any of the company-specific risk be diversified away by investing in both Descartes Systems and PROS Holdings 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 PROS Holdings 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 PROS Holdings, you can compare the effects of market volatilities on Descartes Systems and PROS Holdings 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 PROS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Descartes Systems and PROS Holdings.
Diversification Opportunities for Descartes Systems and PROS Holdings
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Descartes and PROS is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and PROS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROS Holdings 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 PROS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROS Holdings has no effect on the direction of Descartes Systems i.e., Descartes Systems and PROS Holdings go up and down completely randomly.
Pair Corralation between Descartes Systems and PROS Holdings
Given the investment horizon of 90 days Descartes Systems is expected to generate 2.27 times less return on investment than PROS Holdings. But when comparing it to its historical volatility, Descartes Systems Group is 2.23 times less risky than PROS Holdings. It trades about 0.32 of its potential returns per unit of risk. PROS Holdings is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,907 in PROS Holdings on August 28, 2024 and sell it today you would earn a total of 498.00 from holding PROS Holdings or generate 26.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Descartes Systems Group vs. PROS Holdings
Performance |
| Timeline |
| Descartes Systems |
| PROS Holdings |
Descartes Systems and PROS Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Descartes Systems and PROS Holdings
The main advantage of trading using opposite Descartes Systems and PROS Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Descartes Systems position performs unexpectedly, PROS Holdings 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 PROS Holdings will offset losses from the drop in PROS Holdings' long position.The idea behind Descartes Systems Group and PROS Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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