Correlation Between Cadence Design and Qualys

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

Diversification Opportunities for Cadence Design and Qualys

0.8

Correlation Coefficient

Cadence Design  Qualys

Very poor diversification

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

Pair Corralation between Cadence Design and Qualys

Given the investment horizon of 90 days Cadence Design Systems is expected to under-perform the Qualys. In addition to that, Cadence Design is 1.37 times more volatile than Qualys Inc. It trades about -0.08 of its total potential returns per unit of risk. Qualys Inc is currently generating about -0.07 per unit of volatility. If you would invest  14,134  in Qualys Inc on December 26, 2024 and sell it today you would lose (1,161) from holding Qualys Inc or give up 8.21% 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.  Qualys 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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Qualys Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qualys Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cadence Design and Qualys

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

The idea behind Cadence Design Systems and Qualys 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..