Correlation Between Cadence Design and Blackbaud

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

Diversification Opportunities for Cadence Design and Blackbaud

-0.18

Correlation Coefficient

Cadence Design  Blackbaud

Good diversification

The 3 months correlation between Cadence and Blackbaud is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Blackbaud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackbaud 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 Blackbaud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackbaud has no effect on the direction of Cadence Design i.e., Cadence Design and Blackbaud go up and down completely randomly.

Pair Corralation between Cadence Design and Blackbaud

Given the investment horizon of 90 days Cadence Design Systems is expected to generate 1.07 times more return on investment than Blackbaud. However, Cadence Design is 1.07 times more volatile than Blackbaud. It trades about 0.06 of its potential returns per unit of risk. Blackbaud is currently generating about 0.03 per unit of risk. If you would invest  18,570  in Cadence Design Systems on October 3, 2024 and sell it today you would earn a total of  11,476  from holding Cadence Design Systems or generate 61.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Cadence Design Systems  vs.  Blackbaud

Cadence Design Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blackbaud

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackbaud has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Cadence Design and Blackbaud

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

The idea behind Cadence Design Systems and Blackbaud 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.