Correlation Between Cadence Design and Superior Plus

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

Diversification Opportunities for Cadence Design and Superior Plus

-0.68

Correlation Coefficient

Cadence Design  Superior Plus

Excellent diversification

The 3 months correlation between Cadence and Superior is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp 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 Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Cadence Design i.e., Cadence Design and Superior Plus go up and down completely randomly.

Pair Corralation between Cadence Design and Superior Plus

Assuming the 90 days horizon Cadence Design Systems is expected to generate 0.56 times more return on investment than Superior Plus. However, Cadence Design Systems is 1.8 times less risky than Superior Plus. It trades about 0.21 of its potential returns per unit of risk. Superior Plus Corp is currently generating about -0.06 per unit of risk. If you would invest  23,415  in Cadence Design Systems on October 20, 2024 and sell it today you would earn a total of  6,225  from holding Cadence Design Systems or generate 26.59% 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.  Superior Plus Corp

Cadence Design Systems

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cadence Design reported solid returns over the last few months and may actually be approaching a breakup point.

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cadence Design and Superior Plus

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

The idea behind Cadence Design Systems and Superior Plus Corp 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.