Correlation Between Cadence Design and Senmiao Technology

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

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

Diversification Opportunities for Cadence Design and Senmiao Technology

0.31

Correlation Coefficient

Cadence Design  Senmiao Technology

Weak diversification

The 3 months correlation between Cadence and Senmiao is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and Cadence Design 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 Cadence Design Systems are associated (or correlated) with Senmiao Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senmiao Technology has no effect on the direction of Cadence Design i.e., Cadence Design and Senmiao Technology go up and down completely randomly.

Pair Corralation between Cadence Design and Senmiao Technology

Given the investment horizon of 90 days Cadence Design Systems is expected to generate 0.68 times more return on investment than Senmiao Technology. However, Cadence Design Systems is 1.47 times less risky than Senmiao Technology. It trades about 0.14 of its potential returns per unit of risk. Senmiao Technology is currently generating about 0.04 per unit of risk. If you would invest  25,151  in Cadence Design Systems on October 22, 2024 and sell it today you would earn a total of  5,409  from holding Cadence Design Systems or generate 21.51% return on investment over 90 days.

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

Cadence Design Systems  vs.  Senmiao Technology

Cadence Design Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Senmiao Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Senmiao Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Senmiao Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cadence Design and Senmiao Technology

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

The idea behind Cadence Design Systems and Senmiao Technology 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.