Correlation Between Dassault Systmes and Cadence Design

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

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

Diversification Opportunities for Dassault Systmes and Cadence Design

-0.27

Correlation Coefficient

Dassault Systmes  Cadence Design

Very good diversification

The 3 months correlation between Dassault and Cadence is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systmes SE 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 Dassault Systmes 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 Dassault Systmes SE 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 Dassault Systmes i.e., Dassault Systmes and Cadence Design go up and down completely randomly.

Pair Corralation between Dassault Systmes and Cadence Design

Assuming the 90 days horizon Dassault Systmes SE is expected to generate 0.78 times more return on investment than Cadence Design. However, Dassault Systmes SE is 1.28 times less risky than Cadence Design. It trades about -0.03 of its potential returns per unit of risk. Cadence Design Systems is currently generating about -0.03 per unit of risk. If you would invest  3,220  in Dassault Systmes SE on September 23, 2024 and sell it today you would lose (40.00) from holding Dassault Systmes SE or give up 1.24% of portfolio value over 90 days.

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

Dassault Systmes SE  vs.  Cadence Design Systems

Dassault Systmes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systmes SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with Dassault Systmes and Cadence Design

The main advantage of trading using opposite Dassault Systmes and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dassault Systmes 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 Dassault Systmes SE 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 Stocks Directory module to find actively traded stocks across global markets.