Correlation Between Cadence Design and Nasdaq

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

Diversification Opportunities for Cadence Design and Nasdaq

0.8

Correlation Coefficient

Cadence Design  Nasdaq

Very poor diversification

The 3 months correlation between Cadence and Nasdaq is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Cadence Design i.e., Cadence Design and Nasdaq go up and down completely randomly.

Pair Corralation between Cadence Design and Nasdaq

Given the investment horizon of 90 days Cadence Design is expected to generate 2.28 times less return on investment than Nasdaq. In addition to that, Cadence Design is 1.14 times more volatile than Nasdaq Inc. It trades about 0.02 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.06 per unit of volatility. If you would invest  7,794  in Nasdaq Inc on October 23, 2024 and sell it today you would earn a total of  89.00  from holding Nasdaq Inc or generate 1.14% return on investment over 90 days.

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

Cadence Design Systems  vs.  Nasdaq Inc

Cadence Design Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nasdaq Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cadence Design and Nasdaq

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

The idea behind Cadence Design Systems and Nasdaq Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.