Correlation Between Cadence Design and Hamilton Insurance

Can any of the company-specific risk be diversified away by investing in both Cadence Design and Hamilton Insurance 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 Hamilton Insurance 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 Hamilton Insurance Group,, you can compare the effects of market volatilities on Cadence Design and Hamilton Insurance 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 Hamilton Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Hamilton Insurance.

Diversification Opportunities for Cadence Design and Hamilton Insurance

-0.1

Correlation Coefficient

Cadence Design  Hamilton Insurance

Good diversification

The 3 months correlation between Cadence and Hamilton is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Hamilton Insurance Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Insurance Group, 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 Hamilton Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Insurance Group, has no effect on the direction of Cadence Design i.e., Cadence Design and Hamilton Insurance go up and down completely randomly.

Pair Corralation between Cadence Design and Hamilton Insurance

Given the investment horizon of 90 days Cadence Design Systems is expected to generate 1.14 times more return on investment than Hamilton Insurance. However, Cadence Design is 1.14 times more volatile than Hamilton Insurance Group,. It trades about 0.13 of its potential returns per unit of risk. Hamilton Insurance Group, is currently generating about 0.0 per unit of risk. If you would invest  25,628  in Cadence Design Systems on September 3, 2024 and sell it today you would earn a total of  5,399  from holding Cadence Design Systems or generate 21.07% return on investment over 90 days.

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

Cadence Design Systems  vs.  Hamilton Insurance Group,

Cadence Design Systems

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 10 (%) 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.

Hamilton Insurance Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hamilton Insurance Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Hamilton Insurance is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cadence Design and Hamilton Insurance

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

The idea behind Cadence Design Systems and Hamilton Insurance Group, 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.