Correlation Between Cadence Design and Albertsons Companies
Can any of the company-specific risk be diversified away by investing in both Cadence Design and Albertsons Companies 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 Albertsons Companies 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 Albertsons Companies, you can compare the effects of market volatilities on Cadence Design and Albertsons Companies 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 Albertsons Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Albertsons Companies.
Diversification Opportunities for Cadence Design and Albertsons Companies
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cadence and Albertsons is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Albertsons Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albertsons Companies 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 Albertsons Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albertsons Companies has no effect on the direction of Cadence Design i.e., Cadence Design and Albertsons Companies go up and down completely randomly.
Pair Corralation between Cadence Design and Albertsons Companies
Given the investment horizon of 90 days Cadence Design Systems is expected to generate 2.45 times more return on investment than Albertsons Companies. However, Cadence Design is 2.45 times more volatile than Albertsons Companies. It trades about 0.3 of its potential returns per unit of risk. Albertsons Companies is currently generating about 0.22 per unit of risk. If you would invest 25,277 in Cadence Design Systems on August 28, 2024 and sell it today you would earn a total of 5,733 from holding Cadence Design Systems or generate 22.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cadence Design Systems vs. Albertsons Companies
Performance |
| Timeline |
| Cadence Design Systems |
| Albertsons Companies |
Cadence Design and Albertsons Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and Albertsons Companies
The main advantage of trading using opposite Cadence Design and Albertsons Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Albertsons Companies 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 Albertsons Companies will offset losses from the drop in Albertsons Companies' long position.The idea behind Cadence Design Systems and Albertsons Companies 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.| Albertsons Companies vs. Innovative Food Hldg | Albertsons Companies vs. Calavo Growers | Albertsons Companies vs. The Chefs Warehouse | Albertsons Companies vs. AMCON Distributing |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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