Correlation Between Cadence Design and Lionsgate Studios

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

Diversification Opportunities for Cadence Design and Lionsgate Studios

-0.51

Correlation Coefficient

Cadence Design  Lionsgate Studios

Excellent diversification

The 3 months correlation between Cadence and Lionsgate is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Lionsgate Studios Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lionsgate Studios Corp 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 Lionsgate Studios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lionsgate Studios Corp has no effect on the direction of Cadence Design i.e., Cadence Design and Lionsgate Studios go up and down completely randomly.

Pair Corralation between Cadence Design and Lionsgate Studios

Given the investment horizon of 90 days Cadence Design Systems is expected to under-perform the Lionsgate Studios. But the stock apears to be less risky and, when comparing its historical volatility, Cadence Design Systems is 1.33 times less risky than Lionsgate Studios. The stock trades about -0.09 of its potential returns per unit of risk. The Lionsgate Studios Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  726.00  in Lionsgate Studios Corp on December 29, 2024 and sell it today you would earn a total of  33.00  from holding Lionsgate Studios Corp or generate 4.55% return on investment over 90 days.

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

Cadence Design Systems  vs.  Lionsgate Studios Corp

Cadence Design Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadence Design Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lionsgate Studios Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lionsgate Studios Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Lionsgate Studios may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cadence Design and Lionsgate Studios

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

The idea behind Cadence Design Systems and Lionsgate Studios Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.