Correlation Between Cadence Design and ESH Acquisition
Can any of the company-specific risk be diversified away by investing in both Cadence Design and ESH Acquisition 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 ESH Acquisition 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 ESH Acquisition Corp, you can compare the effects of market volatilities on Cadence Design and ESH Acquisition 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 ESH Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and ESH Acquisition.
Diversification Opportunities for Cadence Design and ESH Acquisition
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cadence and ESH is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition Corp 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 ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of Cadence Design i.e., Cadence Design and ESH Acquisition go up and down completely randomly.
Pair Corralation between Cadence Design and ESH Acquisition
Given the investment horizon of 90 days Cadence Design is expected to generate 59.11 times less return on investment than ESH Acquisition. But when comparing it to its historical volatility, Cadence Design Systems is 5.64 times less risky than ESH Acquisition. It trades about 0.02 of its potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 9.00 in ESH Acquisition Corp on October 23, 2024 and sell it today you would earn a total of 2.00 from holding ESH Acquisition Corp or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 72.22% |
| Values | Daily Returns |
Cadence Design Systems vs. ESH Acquisition Corp
Performance |
| Timeline |
| Cadence Design Systems |
| ESH Acquisition Corp |
Cadence Design and ESH Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and ESH Acquisition
The main advantage of trading using opposite Cadence Design and ESH Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, ESH Acquisition 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 ESH Acquisition will offset losses from the drop in ESH Acquisition's long position.| Cadence Design vs. Workday | Cadence Design vs. Salesforce | Cadence Design vs. Intuit Inc | Cadence Design vs. Snowflake |
| ESH Acquisition vs. Golden Energy Offshore | ESH Acquisition vs. Taylor Morn Home | ESH Acquisition vs. HomeTrust Bancshares | ESH Acquisition vs. Bassett Furniture Industries |
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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