Correlation Between Air Products and Cadence Design
Can any of the company-specific risk be diversified away by investing in both Air Products and Cadence Design 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 Air Products and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Cadence Design Systems, you can compare the effects of market volatilities on Air Products and Cadence Design 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 Air Products with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Cadence Design.
Diversification Opportunities for Air Products and Cadence Design
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Air and Cadence is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems and Air Products 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 Air Products Chemicals are associated (or correlated) with Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Air Products i.e., Air Products and Cadence Design go up and down completely randomly.
Pair Corralation between Air Products and Cadence Design
Assuming the 90 days trading horizon Air Products is expected to generate 1.2 times less return on investment than Cadence Design. But when comparing it to its historical volatility, Air Products Chemicals is 1.52 times less risky than Cadence Design. It trades about 0.12 of its potential returns per unit of risk. Cadence Design Systems is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 27,109 in Cadence Design Systems on September 12, 2024 and sell it today you would earn a total of 3,840 from holding Cadence Design Systems or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Air Products Chemicals vs. Cadence Design Systems
Performance |
| Timeline |
| Air Products Chemicals |
| Cadence Design Systems |
Air Products and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Cadence Design
The main advantage of trading using opposite Air Products and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Cadence Design 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 Cadence Design will offset losses from the drop in Cadence Design's long position.| Air Products vs. Oakley Capital Investments | Air Products vs. Aurora Investment Trust | Air Products vs. New Residential Investment | Air Products vs. Liontrust Asset Management |
| Cadence Design vs. Air Products Chemicals | Cadence Design vs. Creo Medical Group | Cadence Design vs. DFS Furniture PLC | Cadence Design vs. Finnair Oyj |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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