Correlation Between Vasta Platform and Cadence Design

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

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

Diversification Opportunities for Vasta Platform and Cadence Design

-0.56

Correlation Coefficient

Vasta Platform  Cadence Design

Excellent diversification

The 3 months correlation between Vasta and Cadence is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vasta Platform 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 Vasta Platform 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 Vasta Platform 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 Vasta Platform i.e., Vasta Platform and Cadence Design go up and down completely randomly.

Pair Corralation between Vasta Platform and Cadence Design

Given the investment horizon of 90 days Vasta Platform is expected to under-perform the Cadence Design. In addition to that, Vasta Platform is 1.47 times more volatile than Cadence Design Systems. It trades about -0.01 of its total potential returns per unit of risk. Cadence Design Systems is currently generating about 0.17 per unit of volatility. If you would invest  25,128  in Cadence Design Systems on October 24, 2024 and sell it today you would earn a total of  7,024  from holding Cadence Design Systems or generate 27.95% return on investment over 90 days.

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

Vasta Platform  vs.  Cadence Design Systems

Vasta Platform

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vasta Platform has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vasta Platform is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 Vasta Platform and Cadence Design

The main advantage of trading using opposite Vasta Platform and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vasta Platform 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 Vasta Platform 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.