Correlation Between Descartes Systems and Model N

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

Diversification Opportunities for Descartes Systems and Model N

-0.13

Correlation Coefficient

Descartes Systems  Model N

Good diversification

The 24 months correlation between Descartes and Model is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Descartes Systems Group and Model N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Model N 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 Model N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Model N has no effect on the direction of Descartes Systems i.e., Descartes Systems and Model N go up and down completely randomly.

Pair Corralation between Descartes Systems and Model N

Given the investment horizon of 90 days Descartes Systems is expected to generate 1.2 times less return on investment than Model N. But when comparing it to its historical volatility, Descartes Systems Group is 1.5 times less risky than Model N. It trades about 0.12 of its potential returns per unit of risk. Model N is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,372  in Model N on February 20, 2024 and sell it today you would earn a total of  615.00  from holding Model N or generate 25.93% return on investment over 90 days.

Time Period	24 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Descartes Systems Group  vs.  Model N

Descartes Systems

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Descartes Systems Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Descartes Systems may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Model N

Risk-Adjusted Performance

2 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Model N are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Model N is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Descartes Systems and Model N

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

The idea behind Descartes Systems Group and Model N 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.