Correlation Between Cadence Design and Zhihu
Can any of the company-specific risk be diversified away by investing in both Cadence Design and Zhihu 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 Zhihu 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 Zhihu Inc ADR, you can compare the effects of market volatilities on Cadence Design and Zhihu 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 Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Zhihu.
Diversification Opportunities for Cadence Design and Zhihu
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cadence and Zhihu is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc ADR 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 Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of Cadence Design i.e., Cadence Design and Zhihu go up and down completely randomly.
Pair Corralation between Cadence Design and Zhihu
Given the investment horizon of 90 days Cadence Design Systems is expected to generate 0.5 times more return on investment than Zhihu. However, Cadence Design Systems is 1.98 times less risky than Zhihu. It trades about 0.16 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.07 per unit of risk. If you would invest 28,445 in Cadence Design Systems on August 30, 2024 and sell it today you would earn a total of 2,023 from holding Cadence Design Systems or generate 7.11% 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. Zhihu Inc ADR
Performance |
| Timeline |
| Cadence Design Systems |
| Zhihu Inc ADR |
Cadence Design and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and Zhihu
The main advantage of trading using opposite Cadence Design and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Zhihu 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 Zhihu will offset losses from the drop in Zhihu's long position.| Cadence Design vs. Zoom Video Communications | Cadence Design vs. C3 Ai Inc | Cadence Design vs. Shopify | Cadence Design vs. Workday |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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