Correlation Between Luxfer Holdings and Cadence Design

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

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

Diversification Opportunities for Luxfer Holdings and Cadence Design

0.53

Correlation Coefficient

Luxfer Holdings  Cadence Design

Very weak diversification

The 3 months correlation between Luxfer and Cadence is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC 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 Luxfer Holdings 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 Luxfer Holdings PLC 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 Luxfer Holdings i.e., Luxfer Holdings and Cadence Design go up and down completely randomly.

Pair Corralation between Luxfer Holdings and Cadence Design

Given the investment horizon of 90 days Luxfer Holdings PLC is expected to generate 0.9 times more return on investment than Cadence Design. However, Luxfer Holdings PLC is 1.12 times less risky than Cadence Design. It trades about -0.07 of its potential returns per unit of risk. Cadence Design Systems is currently generating about -0.09 per unit of risk. If you would invest  1,313  in Luxfer Holdings PLC on December 29, 2024 and sell it today you would lose (131.00) from holding Luxfer Holdings PLC or give up 9.98% of portfolio value over 90 days.

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

Luxfer Holdings PLC  vs.  Cadence Design Systems

Luxfer Holdings PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luxfer Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail 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 Luxfer Holdings and Cadence Design

The main advantage of trading using opposite Luxfer Holdings and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luxfer Holdings 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 Luxfer Holdings PLC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.