Correlation Between Cadence Design and Nike
Can any of the company-specific risk be diversified away by investing in both Cadence Design and Nike 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 Nike 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 Nike Inc, you can compare the effects of market volatilities on Cadence Design and Nike 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 Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Nike.
Diversification Opportunities for Cadence Design and Nike
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cadence and Nike is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Cadence Design i.e., Cadence Design and Nike go up and down completely randomly.
Pair Corralation between Cadence Design and Nike
Given the investment horizon of 90 days Cadence Design Systems is expected to under-perform the Nike. In addition to that, Cadence Design is 1.04 times more volatile than Nike Inc. It trades about -0.21 of its total potential returns per unit of risk. Nike Inc is currently generating about 0.16 per unit of volatility. If you would invest 7,558 in Nike Inc on November 28, 2024 and sell it today you would earn a total of 639.00 from holding Nike Inc or generate 8.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cadence Design Systems vs. Nike Inc
Performance |
| Timeline |
| Cadence Design Systems |
| Nike Inc |
Cadence Design and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and Nike
The main advantage of trading using opposite Cadence Design and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike's long position.| Cadence Design vs. Workday | Cadence Design vs. Salesforce | Cadence Design vs. Intuit Inc | Cadence Design vs. Snowflake |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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