Correlation Between Cadence Design and UNITED UTILITIES

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

Diversification Opportunities for Cadence Design and UNITED UTILITIES

0.59

Correlation Coefficient

Cadence Design  UNITED UTILITIES

Very weak diversification

The 3 months correlation between Cadence and UNITED is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES 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 UNITED UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED UTILITIES has no effect on the direction of Cadence Design i.e., Cadence Design and UNITED UTILITIES go up and down completely randomly.

Pair Corralation between Cadence Design and UNITED UTILITIES

Assuming the 90 days horizon Cadence Design Systems is expected to generate 2.0 times more return on investment than UNITED UTILITIES. However, Cadence Design is 2.0 times more volatile than UNITED UTILITIES GR. It trades about 0.05 of its potential returns per unit of risk. UNITED UTILITIES GR is currently generating about -0.49 per unit of risk. If you would invest  28,995  in Cadence Design Systems on October 9, 2024 and sell it today you would earn a total of  295.00  from holding Cadence Design Systems or generate 1.02% return on investment over 90 days.

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

Cadence Design Systems  vs.  UNITED UTILITIES GR

Cadence Design Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cadence Design reported solid returns over the last few months and may actually be approaching a breakup point.

UNITED UTILITIES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED UTILITIES GR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UNITED UTILITIES is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cadence Design and UNITED UTILITIES

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

The idea behind Cadence Design Systems and UNITED UTILITIES GR 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.