Correlation Between Cadence Design and SAF Holland

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

Diversification Opportunities for Cadence Design and SAF Holland

0.0

Correlation Coefficient

Cadence Design  SAF Holland

Pay attention - limited upside

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

Pair Corralation between Cadence Design and SAF Holland

If you would invest  27,313  in Cadence Design Systems on September 14, 2024 and sell it today you would earn a total of  3,509  from holding Cadence Design Systems or generate 12.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Cadence Design Systems  vs.  SAF Holland SE

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.

SAF Holland SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAF Holland SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, SAF Holland is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cadence Design and SAF Holland

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

The idea behind Cadence Design Systems and SAF Holland SE 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.