Correlation Between Cadence Design and BLACK

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

Diversification Opportunities for Cadence Design and BLACK

-0.15

Correlation Coefficient

Cadence Design  BLACK

Good diversification

The 3 months correlation between Cadence and BLACK is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and BLACK HILLS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLACK HILLS 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 BLACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLACK HILLS P has no effect on the direction of Cadence Design i.e., Cadence Design and BLACK go up and down completely randomly.

Pair Corralation between Cadence Design and BLACK

Given the investment horizon of 90 days Cadence Design is expected to generate 25.98 times less return on investment than BLACK. But when comparing it to its historical volatility, Cadence Design Systems is 27.47 times less risky than BLACK. It trades about 0.05 of its potential returns per unit of risk. BLACK HILLS P is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,670  in BLACK HILLS P on October 24, 2024 and sell it today you would earn a total of  232.00  from holding BLACK HILLS P or generate 2.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.7%
Values	Daily Returns

Cadence Design Systems  vs.  BLACK HILLS P

Cadence Design Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

BLACK HILLS P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cadence Design and BLACK

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

The idea behind Cadence Design Systems and BLACK HILLS 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.