Correlation Between Salesforce and Cadence Design

Can any of the company-specific risk be diversified away by investing in both Salesforce and Cadence Design 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 Salesforce and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Salesforce and Cadence Design Systems, you can compare the effects of market volatilities on Salesforce and Cadence Design 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 Salesforce with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salesforce and Cadence Design.

Diversification Opportunities for Salesforce and Cadence Design

0.86

Correlation Coefficient

Salesforce  Cadence Design

Very poor diversification

The 3 months correlation between Salesforce and Cadence is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems and Salesforce 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 Salesforce are associated (or correlated) with Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Salesforce i.e., Salesforce and Cadence Design go up and down completely randomly.

Pair Corralation between Salesforce and Cadence Design

Considering the 90-day investment horizon Salesforce is expected to under-perform the Cadence Design. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.33 times less risky than Cadence Design. The stock trades about -0.18 of its potential returns per unit of risk. The Cadence Design Systems is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  30,186  in Cadence Design Systems on December 30, 2024 and sell it today you would lose (4,517) from holding Cadence Design Systems or give up 14.96% of portfolio value over 90 days.

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

Salesforce  vs.  Cadence Design Systems

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cadence Design Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadence Design Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Salesforce and Cadence Design

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

The idea behind Salesforce and Cadence Design Systems 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.