Correlation Between Cadence Design and PTC

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

Diversification Opportunities for Cadence Design and PTC

0.86

Correlation Coefficient

Cadence Design  PTC

Very poor diversification

The 3 months correlation between Cadence and PTC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and PTC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTC 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 PTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTC Inc has no effect on the direction of Cadence Design i.e., Cadence Design and PTC go up and down completely randomly.

Pair Corralation between Cadence Design and PTC

Given the investment horizon of 90 days Cadence Design Systems is expected to generate 1.5 times more return on investment than PTC. However, Cadence Design is 1.5 times more volatile than PTC Inc. It trades about -0.09 of its potential returns per unit of risk. PTC Inc is currently generating about -0.13 per unit of risk. If you would invest  30,503  in Cadence Design Systems on December 27, 2024 and sell it today you would lose (4,249) from holding Cadence Design Systems or give up 13.93% of portfolio value over 90 days.

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

Cadence Design Systems  vs.  PTC Inc

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 weak 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.

PTC Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PTC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cadence Design and PTC

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

The idea behind Cadence Design Systems and PTC 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.