Correlation Between Cadence Design and European Wax

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

Diversification Opportunities for Cadence Design and European Wax

-0.38

Correlation Coefficient

Cadence Design  European Wax

Very good diversification

The 3 months correlation between Cadence and European is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and European Wax Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Wax Center 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 European Wax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Wax Center has no effect on the direction of Cadence Design i.e., Cadence Design and European Wax go up and down completely randomly.

Pair Corralation between Cadence Design and European Wax

Given the investment horizon of 90 days Cadence Design Systems is expected to generate 0.57 times more return on investment than European Wax. However, Cadence Design Systems is 1.77 times less risky than European Wax. It trades about 0.07 of its potential returns per unit of risk. European Wax Center is currently generating about -0.03 per unit of risk. If you would invest  16,193  in Cadence Design Systems on September 19, 2024 and sell it today you would earn a total of  13,931  from holding Cadence Design Systems or generate 86.03% 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.  European Wax Center

Cadence Design Systems

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cadence Design may actually be approaching a critical reversion point that can send shares even higher in January 2025.

European Wax Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Wax Center has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cadence Design and European Wax

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

The idea behind Cadence Design Systems and European Wax Center 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.