Correlation Between Citigroup and Cadence Design
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Cadence Design Systems, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Cadence Design.
Diversification Opportunities for Citigroup and Cadence Design
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Cadence is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup 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 Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Cadence Design go up and down completely randomly.
Pair Corralation between Citigroup and Cadence Design
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.74 times more return on investment than Cadence Design. However, Citigroup is 1.35 times less risky than Cadence Design. It trades about 0.11 of its potential returns per unit of risk. Cadence Design Systems is currently generating about 0.03 per unit of risk. If you would invest 4,788 in Citigroup on September 12, 2024 and sell it today you would earn a total of 2,408 from holding Citigroup or generate 50.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.02% |
| Values | Daily Returns |
Citigroup vs. Cadence Design Systems
Performance |
| Timeline |
| Citigroup |
| Cadence Design Systems |
Citigroup and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Cadence Design
The main advantage of trading using opposite Citigroup and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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