Correlation Between Valneva SE and Cadence Design

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

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

Diversification Opportunities for Valneva SE and Cadence Design

-0.75

Correlation Coefficient

Valneva SE  Cadence Design

Pay attention - limited upside

The 3 months correlation between Valneva and Cadence is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Valneva SE ADR 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 Valneva SE 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 Valneva SE ADR 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 Valneva SE i.e., Valneva SE and Cadence Design go up and down completely randomly.

Pair Corralation between Valneva SE and Cadence Design

Given the investment horizon of 90 days Valneva SE ADR is expected to under-perform the Cadence Design. In addition to that, Valneva SE is 1.02 times more volatile than Cadence Design Systems. It trades about -0.36 of its total potential returns per unit of risk. Cadence Design Systems is currently generating about 0.09 per unit of volatility. If you would invest  26,893  in Cadence Design Systems on August 30, 2024 and sell it today you would earn a total of  3,575  from holding Cadence Design Systems or generate 13.29% return on investment over 90 days.

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

Valneva SE ADR  vs.  Cadence Design Systems

Valneva SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valneva SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cadence Design Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valneva SE and Cadence Design

The main advantage of trading using opposite Valneva SE and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valneva SE 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 Valneva SE ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.