Correlation Between VirnetX Holding and Cadence Design

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

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

Diversification Opportunities for VirnetX Holding and Cadence Design

-0.76

Correlation Coefficient

VirnetX Holding  Cadence Design

Pay attention - limited upside

The 3 months correlation between VirnetX and Cadence is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding VirnetX Holding Corp 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 VirnetX Holding 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 VirnetX Holding Corp 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 VirnetX Holding i.e., VirnetX Holding and Cadence Design go up and down completely randomly.

Pair Corralation between VirnetX Holding and Cadence Design

Considering the 90-day investment horizon VirnetX Holding Corp is expected to under-perform the Cadence Design. In addition to that, VirnetX Holding is 1.12 times more volatile than Cadence Design Systems. It trades about -0.29 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  27,479  in Cadence Design Systems on September 17, 2024 and sell it today you would earn a total of  4,062  from holding Cadence Design Systems or generate 14.78% return on investment over 90 days.

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

VirnetX Holding Corp  vs.  Cadence Design Systems

VirnetX Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VirnetX Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cadence Design Systems

Risk-Adjusted Performance

7 of 100

Modest

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 weak basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VirnetX Holding and Cadence Design

The main advantage of trading using opposite VirnetX Holding and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VirnetX Holding 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 VirnetX Holding Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.