Correlation Between Cadence Design and Lipocine

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

Diversification Opportunities for Cadence Design and Lipocine

-0.03

Correlation Coefficient

Cadence Design  Lipocine

Good diversification

The 3 months correlation between Cadence and Lipocine is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Lipocine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipocine 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 Lipocine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipocine has no effect on the direction of Cadence Design i.e., Cadence Design and Lipocine go up and down completely randomly.

Pair Corralation between Cadence Design and Lipocine

Given the investment horizon of 90 days Cadence Design is expected to generate 3.28 times less return on investment than Lipocine. But when comparing it to its historical volatility, Cadence Design Systems is 1.98 times less risky than Lipocine. It trades about 0.02 of its potential returns per unit of risk. Lipocine is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  518.00  in Lipocine on September 14, 2024 and sell it today you would earn a total of  8.00  from holding Lipocine or generate 1.54% 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.  Lipocine

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

Lipocine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lipocine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Lipocine displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cadence Design and Lipocine

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

The idea behind Cadence Design Systems and Lipocine 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.