Correlation Between Cadence Design and Bentley Systems

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

Diversification Opportunities for Cadence Design and Bentley Systems

-0.31

Correlation Coefficient

Cadence Design  Bentley Systems

Very good diversification

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

Pair Corralation between Cadence Design and Bentley Systems

Given the investment horizon of 90 days Cadence Design Systems is expected to generate 1.08 times more return on investment than Bentley Systems. However, Cadence Design is 1.08 times more volatile than Bentley Systems. It trades about 0.06 of its potential returns per unit of risk. Bentley Systems 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	100.0%
Values	Daily Returns

Cadence Design Systems  vs.  Bentley Systems

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.

Bentley Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bentley Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bentley Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cadence Design and Bentley Systems

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

The idea behind Cadence Design Systems and Bentley 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.