Correlation Between Penta Ocean and Cadence Design

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

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

Diversification Opportunities for Penta Ocean and Cadence Design

-0.78

Correlation Coefficient

Penta Ocean  Cadence Design

Pay attention - limited upside

The 3 months correlation between Penta and Cadence is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co 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 Penta Ocean 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 Penta Ocean Construction Co 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 Penta Ocean i.e., Penta Ocean and Cadence Design go up and down completely randomly.

Pair Corralation between Penta Ocean and Cadence Design

Assuming the 90 days horizon Penta Ocean Construction Co is expected to generate 0.87 times more return on investment than Cadence Design. However, Penta Ocean Construction Co is 1.15 times less risky than Cadence Design. It trades about 0.13 of its potential returns per unit of risk. Cadence Design Systems is currently generating about -0.12 per unit of risk. If you would invest  380.00  in Penta Ocean Construction Co on December 23, 2024 and sell it today you would earn a total of  66.00  from holding Penta Ocean Construction Co or generate 17.37% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Cadence Design Systems

Penta Ocean Construc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penta Ocean reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Penta Ocean and Cadence Design

The main advantage of trading using opposite Penta Ocean and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta Ocean 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 Penta Ocean Construction Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.