Correlation Between Cadence Design and Nathans Famous

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

Diversification Opportunities for Cadence Design and Nathans Famous

0.1

Correlation Coefficient

Cadence Design  Nathans Famous

Average diversification

The 3 months correlation between Cadence and Nathans is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Nathans Famous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nathans Famous 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 Nathans Famous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nathans Famous has no effect on the direction of Cadence Design i.e., Cadence Design and Nathans Famous go up and down completely randomly.

Pair Corralation between Cadence Design and Nathans Famous

Given the investment horizon of 90 days Cadence Design is expected to generate 1.12 times less return on investment than Nathans Famous. In addition to that, Cadence Design is 1.26 times more volatile than Nathans Famous. It trades about 0.03 of its total potential returns per unit of risk. Nathans Famous is currently generating about 0.04 per unit of volatility. If you would invest  6,914  in Nathans Famous on October 9, 2024 and sell it today you would earn a total of  895.00  from holding Nathans Famous or generate 12.94% return on investment over 90 days.

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

Cadence Design Systems  vs.  Nathans Famous

Cadence Design Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 5 (%) 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 February 2025.

Nathans Famous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nathans Famous has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nathans Famous is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cadence Design and Nathans Famous

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

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