Correlation Between Bentley Systems and Cadence Design

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

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

Diversification Opportunities for Bentley Systems and Cadence Design

-0.29

Correlation Coefficient

Bentley Systems  Cadence Design

Very good diversification

The 3 months correlation between Bentley and Cadence is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bentley Systems 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 Bentley Systems 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 Bentley Systems 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 Bentley Systems i.e., Bentley Systems and Cadence Design go up and down completely randomly.

Pair Corralation between Bentley Systems and Cadence Design

Considering the 90-day investment horizon Bentley Systems is expected to under-perform the Cadence Design. But the stock apears to be less risky and, when comparing its historical volatility, Bentley Systems is 1.68 times less risky than Cadence Design. The stock trades about -0.04 of its potential returns per unit of risk. The Cadence Design Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  28,035  in Cadence Design Systems on September 19, 2024 and sell it today you would earn a total of  3,100  from holding Cadence Design Systems or generate 11.06% return on investment over 90 days.

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

Bentley Systems  vs.  Cadence Design Systems

Bentley Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bentley Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bentley Systems is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cadence Design Systems

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cadence Design may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bentley Systems and Cadence Design

The main advantage of trading using opposite Bentley Systems and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bentley Systems 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 Bentley Systems 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.