Correlation Between Cadence Design and SPARTAN STORES

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

Diversification Opportunities for Cadence Design and SPARTAN STORES

-0.03

Correlation Coefficient

Cadence Design  SPARTAN STORES

Good diversification

The 3 months correlation between Cadence and SPARTAN is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES 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 SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of Cadence Design i.e., Cadence Design and SPARTAN STORES go up and down completely randomly.

Pair Corralation between Cadence Design and SPARTAN STORES

Assuming the 90 days horizon Cadence Design Systems is expected to generate 1.05 times more return on investment than SPARTAN STORES. However, Cadence Design is 1.05 times more volatile than SPARTAN STORES. It trades about 0.07 of its potential returns per unit of risk. SPARTAN STORES is currently generating about -0.04 per unit of risk. If you would invest  17,110  in Cadence Design Systems on October 26, 2024 and sell it today you would earn a total of  13,320  from holding Cadence Design Systems or generate 77.85% return on investment over 90 days.

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

Cadence Design Systems  vs.  SPARTAN STORES

Cadence Design Systems

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 15 (%) 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.

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cadence Design and SPARTAN STORES

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

The idea behind Cadence Design Systems and SPARTAN STORES 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.