Correlation Between Ingredion Incorporated and Cadence Design

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

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

Diversification Opportunities for Ingredion Incorporated and Cadence Design

0.42

Correlation Coefficient

Ingredion Incorporated  Cadence Design

Very weak diversification

The 3 months correlation between Ingredion and Cadence is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ingredion Incorporated 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 Ingredion Incorporated 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 Ingredion Incorporated 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 Ingredion Incorporated i.e., Ingredion Incorporated and Cadence Design go up and down completely randomly.

Pair Corralation between Ingredion Incorporated and Cadence Design

Given the investment horizon of 90 days Ingredion Incorporated is expected to generate 9.1 times less return on investment than Cadence Design. But when comparing it to its historical volatility, Ingredion Incorporated is 1.06 times less risky than Cadence Design. It trades about 0.02 of its potential returns per unit of risk. Cadence Design Systems is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  25,277  in Cadence Design Systems on October 27, 2024 and sell it today you would earn a total of  6,771  from holding Cadence Design Systems or generate 26.79% return on investment over 90 days.

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

Ingredion Incorporated  vs.  Cadence Design Systems

Ingredion Incorporated

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ingredion Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Ingredion Incorporated is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Cadence Design Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ingredion Incorporated and Cadence Design

The main advantage of trading using opposite Ingredion Incorporated and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingredion Incorporated 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 Ingredion Incorporated 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.