Correlation Between Cadence Design and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Cadence Design and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum, you can compare the effects of market volatilities on Cadence Design and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Kaiser Aluminum.
Diversification Opportunities for Cadence Design and Kaiser Aluminum
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cadence and Kaiser is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Cadence Design i.e., Cadence Design and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Cadence Design and Kaiser Aluminum
Given the investment horizon of 90 days Cadence Design Systems is expected to generate 0.62 times more return on investment than Kaiser Aluminum. However, Cadence Design Systems is 1.61 times less risky than Kaiser Aluminum. It trades about 0.24 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.14 per unit of risk. If you would invest 28,934 in Cadence Design Systems on September 5, 2024 and sell it today you would earn a total of 2,391 from holding Cadence Design Systems or generate 8.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cadence Design Systems vs. Kaiser Aluminum
Performance |
| Timeline |
| Cadence Design Systems |
| Kaiser Aluminum |
Cadence Design and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and Kaiser Aluminum
The main advantage of trading using opposite Cadence Design and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| Cadence Design vs. HeartCore Enterprises | Cadence Design vs. Beamr Imaging Ltd | Cadence Design vs. Trust Stamp | Cadence Design vs. CXApp Inc |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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