Correlation Between Cadence Design and KEYBANK

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

Diversification Opportunities for Cadence Design and KEYBANK

0.02

Correlation Coefficient

Cadence Design  KEYBANK

Significant diversification

The 3 months correlation between Cadence and KEYBANK is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and KEYBANK NATL ASSN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYBANK NATL ASSN 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 KEYBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYBANK NATL ASSN has no effect on the direction of Cadence Design i.e., Cadence Design and KEYBANK go up and down completely randomly.

Pair Corralation between Cadence Design and KEYBANK

Given the investment horizon of 90 days Cadence Design Systems is expected to generate 2.5 times more return on investment than KEYBANK. However, Cadence Design is 2.5 times more volatile than KEYBANK NATL ASSN. It trades about 0.08 of its potential returns per unit of risk. KEYBANK NATL ASSN is currently generating about -0.03 per unit of risk. If you would invest  16,064  in Cadence Design Systems on September 20, 2024 and sell it today you would earn a total of  15,071  from holding Cadence Design Systems or generate 93.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	60.4%
Values	Daily Returns

Cadence Design Systems  vs.  KEYBANK NATL ASSN

Cadence Design Systems

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 7 (%) 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.

KEYBANK NATL ASSN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYBANK NATL ASSN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for KEYBANK NATL ASSN investors.

Pair Trading with Cadence Design and KEYBANK

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

The idea behind Cadence Design Systems and KEYBANK NATL ASSN 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.