Correlation Between Blackline and Cadence Design
Can any of the company-specific risk be diversified away by investing in both Blackline 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 Blackline and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blackline and Cadence Design Systems, you can compare the effects of market volatilities on Blackline 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 Blackline with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackline and Cadence Design.
Diversification Opportunities for Blackline and Cadence Design
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blackline and Cadence is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Blackline 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 Blackline 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 Blackline 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 Blackline i.e., Blackline and Cadence Design go up and down completely randomly.
Pair Corralation between Blackline and Cadence Design
Allowing for the 90-day total investment horizon Blackline is expected to generate 1.88 times less return on investment than Cadence Design. But when comparing it to its historical volatility, Blackline is 1.47 times less risky than Cadence Design. It trades about 0.22 of its potential returns per unit of risk. Cadence Design Systems is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 25,730 in Cadence Design Systems on August 26, 2024 and sell it today you would earn a total of 5,457 from holding Cadence Design Systems or generate 21.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blackline vs. Cadence Design Systems
Performance |
| Timeline |
| Blackline |
| Cadence Design Systems |
Blackline and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blackline and Cadence Design
The main advantage of trading using opposite Blackline and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackline 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.The idea behind Blackline and Cadence Design Systems 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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