Correlation Between Cadence Design and Litigation Capital
Can any of the company-specific risk be diversified away by investing in both Cadence Design and Litigation Capital 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 Litigation Capital 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 Litigation Capital Management, you can compare the effects of market volatilities on Cadence Design and Litigation Capital 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 Litigation Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Litigation Capital.
Diversification Opportunities for Cadence Design and Litigation Capital
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cadence and Litigation is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Litigation Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litigation Capital 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 Litigation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litigation Capital has no effect on the direction of Cadence Design i.e., Cadence Design and Litigation Capital go up and down completely randomly.
Pair Corralation between Cadence Design and Litigation Capital
Assuming the 90 days trading horizon Cadence Design Systems is expected to generate 1.21 times more return on investment than Litigation Capital. However, Cadence Design is 1.21 times more volatile than Litigation Capital Management. It trades about 0.03 of its potential returns per unit of risk. Litigation Capital Management is currently generating about -0.11 per unit of risk. If you would invest 30,738 in Cadence Design Systems on October 25, 2024 and sell it today you would earn a total of 292.00 from holding Cadence Design Systems or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Cadence Design Systems vs. Litigation Capital Management
Performance |
| Timeline |
| Cadence Design Systems |
| Litigation Capital |
Cadence Design and Litigation Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and Litigation Capital
The main advantage of trading using opposite Cadence Design and Litigation Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Litigation Capital 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 Litigation Capital will offset losses from the drop in Litigation Capital's long position.| Cadence Design vs. Synthomer plc | Cadence Design vs. Cellnex Telecom SA | Cadence Design vs. Home Depot | Cadence Design vs. Charter Communications Cl |
| Litigation Capital vs. Golden Metal Resources | Litigation Capital vs. Pentair PLC | Litigation Capital vs. Alaska Air Group | Litigation Capital vs. European Metals Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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