Correlation Between Cadence Design and Sparta Commercial

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

Diversification Opportunities for Cadence Design and Sparta Commercial

-0.72

Correlation Coefficient

Cadence Design  Sparta Commercial

Pay attention - limited upside

The 3 months correlation between Cadence and Sparta is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Sparta Commercial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Commercial 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 Sparta Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Commercial has no effect on the direction of Cadence Design i.e., Cadence Design and Sparta Commercial go up and down completely randomly.

Pair Corralation between Cadence Design and Sparta Commercial

Given the investment horizon of 90 days Cadence Design Systems is expected to under-perform the Sparta Commercial. But the stock apears to be less risky and, when comparing its historical volatility, Cadence Design Systems is 2.98 times less risky than Sparta Commercial. The stock trades about -0.09 of its potential returns per unit of risk. The Sparta Commercial Services is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Sparta Commercial Services on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Sparta Commercial Services or generate 47.37% return on investment over 90 days.

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

Cadence Design Systems  vs.  Sparta Commercial Services

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 conflicting 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.

Sparta Commercial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Commercial Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Sparta Commercial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cadence Design and Sparta Commercial

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

The idea behind Cadence Design Systems and Sparta Commercial Services 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.