Correlation Between Cadence Design and Revolve Group

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

Diversification Opportunities for Cadence Design and Revolve Group

0.89

Correlation Coefficient

Cadence Design  Revolve Group

Very poor diversification

The 3 months correlation between Cadence and Revolve is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Revolve Group LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolve Group LLC 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 Revolve Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolve Group LLC has no effect on the direction of Cadence Design i.e., Cadence Design and Revolve Group go up and down completely randomly.

Pair Corralation between Cadence Design and Revolve Group

Given the investment horizon of 90 days Cadence Design is expected to generate 2.78 times less return on investment than Revolve Group. But when comparing it to its historical volatility, Cadence Design Systems is 1.74 times less risky than Revolve Group. It trades about 0.08 of its potential returns per unit of risk. Revolve Group LLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,530  in Revolve Group LLC on September 26, 2024 and sell it today you would earn a total of  851.00  from holding Revolve Group LLC or generate 33.64% return on investment over 90 days.

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

Cadence Design Systems  vs.  Revolve Group LLC

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Revolve Group LLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Revolve Group LLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Revolve Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cadence Design and Revolve Group

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

The idea behind Cadence Design Systems and Revolve Group LLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.