Correlation Between Cadence Design and 06051GGA1

Can any of the company-specific risk be diversified away by investing in both Cadence Design and 06051GGA1 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 06051GGA1 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 BANK AMER P, you can compare the effects of market volatilities on Cadence Design and 06051GGA1 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 06051GGA1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and 06051GGA1.

Diversification Opportunities for Cadence Design and 06051GGA1

-0.18

Correlation Coefficient

Cadence Design  06051GGA1

Good diversification

The 3 months correlation between Cadence and 06051GGA1 is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and BANK AMER P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK AMER P 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 06051GGA1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK AMER P has no effect on the direction of Cadence Design i.e., Cadence Design and 06051GGA1 go up and down completely randomly.

Pair Corralation between Cadence Design and 06051GGA1

Given the investment horizon of 90 days Cadence Design Systems is expected to generate 4.28 times more return on investment than 06051GGA1. However, Cadence Design is 4.28 times more volatile than BANK AMER P. It trades about 0.06 of its potential returns per unit of risk. BANK AMER P is currently generating about -0.03 per unit of risk. If you would invest  17,826  in Cadence Design Systems on October 11, 2024 and sell it today you would earn a total of  12,447  from holding Cadence Design Systems or generate 69.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Cadence Design Systems  vs.  BANK AMER P

Cadence Design Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cadence Design may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BANK AMER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK AMER P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for BANK AMER P investors.

Pair Trading with Cadence Design and 06051GGA1

The main advantage of trading using opposite Cadence Design and 06051GGA1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, 06051GGA1 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 06051GGA1 will offset losses from the drop in 06051GGA1's long position.

The idea behind Cadence Design Systems and BANK AMER P 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.