Correlation Between Cadence Design and Trend Micro
Can any of the company-specific risk be diversified away by investing in both Cadence Design and Trend Micro 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 Trend Micro 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 Trend Micro, you can compare the effects of market volatilities on Cadence Design and Trend Micro 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 Trend Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Trend Micro.
Diversification Opportunities for Cadence Design and Trend Micro
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cadence and Trend is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Trend Micro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trend Micro 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 Trend Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trend Micro has no effect on the direction of Cadence Design i.e., Cadence Design and Trend Micro go up and down completely randomly.
Pair Corralation between Cadence Design and Trend Micro
Given the investment horizon of 90 days Cadence Design Systems is expected to under-perform the Trend Micro. But the stock apears to be less risky and, when comparing its historical volatility, Cadence Design Systems is 1.1 times less risky than Trend Micro. The stock trades about 0.0 of its potential returns per unit of risk. The Trend Micro is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,686 in Trend Micro on September 15, 2024 and sell it today you would earn a total of 1,074 from holding Trend Micro or generate 22.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cadence Design Systems vs. Trend Micro
Performance |
| Timeline |
| Cadence Design Systems |
| Trend Micro |
Cadence Design and Trend Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and Trend Micro
The main advantage of trading using opposite Cadence Design and Trend Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Trend Micro 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 Trend Micro will offset losses from the drop in Trend Micro's long position.| Cadence Design vs. Workday | Cadence Design vs. Salesforce | Cadence Design vs. Intuit Inc | Cadence Design vs. Snowflake |
| Trend Micro vs. Paltalk | Trend Micro vs. Aris Water Solutions | Trend Micro vs. Cadence Design Systems | Trend Micro vs. Transportadora de Gas |
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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