Correlation Between Cadence Design and Highway Holdings
Can any of the company-specific risk be diversified away by investing in both Cadence Design and Highway Holdings 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 Highway Holdings 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 Highway Holdings Limited, you can compare the effects of market volatilities on Cadence Design and Highway Holdings 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 Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Highway Holdings.
Diversification Opportunities for Cadence Design and Highway Holdings
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cadence and Highway is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings 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 Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of Cadence Design i.e., Cadence Design and Highway Holdings go up and down completely randomly.
Pair Corralation between Cadence Design and Highway Holdings
Given the investment horizon of 90 days Cadence Design Systems is expected to generate 0.68 times more return on investment than Highway Holdings. However, Cadence Design Systems is 1.46 times less risky than Highway Holdings. It trades about 0.08 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.01 per unit of risk. If you would invest 15,966 in Cadence Design Systems on August 28, 2024 and sell it today you would earn a total of 15,273 from holding Cadence Design Systems or generate 95.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.58% |
| Values | Daily Returns |
Cadence Design Systems vs. Highway Holdings Limited
Performance |
| Timeline |
| Cadence Design Systems |
| Highway Holdings |
Cadence Design and Highway Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and Highway Holdings
The main advantage of trading using opposite Cadence Design and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Highway Holdings 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 Highway Holdings will offset losses from the drop in Highway Holdings' long position.The idea behind Cadence Design Systems and Highway Holdings Limited 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.| Highway Holdings vs. Dave Warrants | Highway Holdings vs. Evolv Technologies Holdings | Highway Holdings vs. Aquagold International | Highway Holdings vs. Morningstar Unconstrained Allocation |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Stocks Directory Find actively traded stocks across global markets |