Correlation Between Cadence Design and Sonida Senior

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

Diversification Opportunities for Cadence Design and Sonida Senior

-0.29

Correlation Coefficient

Cadence Design  Sonida Senior

Very good diversification

The 3 months correlation between Cadence and Sonida is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Cadence Design i.e., Cadence Design and Sonida Senior go up and down completely randomly.

Pair Corralation between Cadence Design and Sonida Senior

Given the investment horizon of 90 days Cadence Design is expected to generate 7.54 times less return on investment than Sonida Senior. But when comparing it to its historical volatility, Cadence Design Systems is 2.35 times less risky than Sonida Senior. It trades about 0.03 of its potential returns per unit of risk. Sonida Senior Living is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  977.00  in Sonida Senior Living on September 17, 2024 and sell it today you would earn a total of  1,506  from holding Sonida Senior Living or generate 154.15% return on investment over 90 days.

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

Cadence Design Systems  vs.  Sonida Senior Living

Cadence Design Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sonida Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cadence Design and Sonida Senior

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

The idea behind Cadence Design Systems and Sonida Senior Living 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.