Correlation Between Cadence Design and GB Group
Can any of the company-specific risk be diversified away by investing in both Cadence Design and GB Group 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 GB Group 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 GB Group plc, you can compare the effects of market volatilities on Cadence Design and GB Group 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 GB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and GB Group.
Diversification Opportunities for Cadence Design and GB Group
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cadence and 0GB is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and GB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GB Group plc 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 GB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GB Group plc has no effect on the direction of Cadence Design i.e., Cadence Design and GB Group go up and down completely randomly.
Pair Corralation between Cadence Design and GB Group
Assuming the 90 days horizon Cadence Design Systems is expected to generate 0.84 times more return on investment than GB Group. However, Cadence Design Systems is 1.19 times less risky than GB Group. It trades about 0.07 of its potential returns per unit of risk. GB Group plc is currently generating about 0.01 per unit of risk. If you would invest 16,716 in Cadence Design Systems on October 23, 2024 and sell it today you would earn a total of 12,964 from holding Cadence Design Systems or generate 77.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Cadence Design Systems vs. GB Group plc
Performance |
| Timeline |
| Cadence Design Systems |
| GB Group plc |
Cadence Design and GB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and GB Group
The main advantage of trading using opposite Cadence Design and GB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, GB Group 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 GB Group will offset losses from the drop in GB Group's long position.| Cadence Design vs. British American Tobacco | Cadence Design vs. Liberty Broadband | Cadence Design vs. BII Railway Transportation | Cadence Design vs. National Retail Properties |
| GB Group vs. SIDETRADE EO 1 | GB Group vs. Scandinavian Tobacco Group | GB Group vs. Fast Retailing Co | GB Group vs. CVW CLEANTECH INC |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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