Correlation Between Cadence Design and Fibria Celulose

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

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

Diversification Opportunities for Cadence Design and Fibria Celulose

0.0

Correlation Coefficient

Cadence Design  Fibria Celulose

Pay attention - limited upside

The 3 months correlation between Cadence and Fibria is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Fibria Celulose SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibria Celulose SA and Cadence Design 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 Cadence Design Systems are associated (or correlated) with Fibria Celulose. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibria Celulose SA has no effect on the direction of Cadence Design i.e., Cadence Design and Fibria Celulose go up and down completely randomly.

Pair Corralation between Cadence Design and Fibria Celulose

If you would invest  16,592  in Cadence Design Systems on September 29, 2024 and sell it today you would earn a total of  13,911  from holding Cadence Design Systems or generate 83.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cadence Design Systems  vs.  Fibria Celulose SA

Cadence Design Systems

Risk-Adjusted Performance

6 of 100

Modest

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

Fibria Celulose SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fibria Celulose SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Fibria Celulose is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cadence Design and Fibria Celulose

The main advantage of trading using opposite Cadence Design and Fibria Celulose positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Fibria Celulose 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 Fibria Celulose will offset losses from the drop in Fibria Celulose's long position.

The idea behind Cadence Design Systems and Fibria Celulose SA 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.