Correlation Between Bill and Cadence Design

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

By analyzing existing cross correlation between Bill Com Holdings and Cadence Design Systems, you can compare the effects of market volatilities on Bill and Cadence Design 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 Bill with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bill and Cadence Design.

Diversification Opportunities for Bill and Cadence Design

0.74

Correlation Coefficient

Bill  Cadence Design

Poor diversification

The 3 months correlation between Bill and Cadence is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bill Com Holdings and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems and Bill 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 Bill Com Holdings are associated (or correlated) with Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Bill i.e., Bill and Cadence Design go up and down completely randomly.

Pair Corralation between Bill and Cadence Design

Given the investment horizon of 90 days Bill Com Holdings is expected to under-perform the Cadence Design. In addition to that, Bill is 3.17 times more volatile than Cadence Design Systems. It trades about -0.33 of its total potential returns per unit of risk. Cadence Design Systems is currently generating about -0.38 per unit of volatility. If you would invest  29,830  in Cadence Design Systems on December 5, 2024 and sell it today you would lose (5,656) from holding Cadence Design Systems or give up 18.96% of portfolio value over 90 days.

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

Bill Com Holdings  vs.  Cadence Design Systems

Bill Com Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bill Com Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Cadence Design Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadence Design Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bill and Cadence Design

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

The idea behind Bill Com Holdings and Cadence Design Systems 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.