Correlation Between Cadence Design and Bill

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

Diversification Opportunities for Cadence Design and Bill

0.87

Correlation Coefficient

Cadence Design  Bill

Very poor diversification

The 3 months correlation between Cadence and Bill is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Bill Com Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bill Com Holdings 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 Bill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bill Com Holdings has no effect on the direction of Cadence Design i.e., Cadence Design and Bill go up and down completely randomly.

Pair Corralation between Cadence Design and Bill

Given the investment horizon of 90 days Cadence Design is expected to generate 4.29 times less return on investment than Bill. But when comparing it to its historical volatility, Cadence Design Systems is 1.34 times less risky than Bill. It trades about 0.08 of its potential returns per unit of risk. Bill Com Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  5,075  in Bill Com Holdings on September 16, 2024 and sell it today you would earn a total of  3,709  from holding Bill Com Holdings or generate 73.08% return on investment over 90 days.

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

Cadence Design Systems  vs.  Bill Com Holdings

Cadence Design Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bill Com Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bill Com Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Bill disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cadence Design and Bill

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

The idea behind Cadence Design Systems and Bill Com 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.