Correlation Between Cadence Design and Intuit

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

Diversification Opportunities for Cadence Design and Intuit

0.84

Correlation Coefficient

Cadence Design  Intuit

Very poor diversification

The 3 months correlation between Cadence and Intuit is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Intuit Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intuit Inc 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 Intuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intuit Inc has no effect on the direction of Cadence Design i.e., Cadence Design and Intuit go up and down completely randomly.

Pair Corralation between Cadence Design and Intuit

Assuming the 90 days horizon Cadence Design Systems is expected to generate 1.25 times more return on investment than Intuit. However, Cadence Design is 1.25 times more volatile than Intuit Inc. It trades about 0.02 of its potential returns per unit of risk. Intuit Inc is currently generating about -0.05 per unit of risk. If you would invest  29,115  in Cadence Design Systems on September 22, 2024 and sell it today you would earn a total of  185.00  from holding Cadence Design Systems or generate 0.64% return on investment over 90 days.

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

Cadence Design Systems  vs.  Intuit Inc

Cadence Design Systems

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 10 (%) 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.

Intuit Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intuit Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Intuit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cadence Design and Intuit

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

The idea behind Cadence Design Systems and Intuit Inc 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.