Correlation Between Cadence Design and Magic Software
Can any of the company-specific risk be diversified away by investing in both Cadence Design and Magic Software 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 Magic Software 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 Magic Software Enterprises, you can compare the effects of market volatilities on Cadence Design and Magic Software 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 Magic Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Design and Magic Software.
Diversification Opportunities for Cadence Design and Magic Software
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cadence and Magic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Design Systems and Magic Software Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Software Enter 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 Magic Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magic Software Enter has no effect on the direction of Cadence Design i.e., Cadence Design and Magic Software go up and down completely randomly.
Pair Corralation between Cadence Design and Magic Software
Assuming the 90 days horizon Cadence Design Systems is expected to under-perform the Magic Software. But the stock apears to be less risky and, when comparing its historical volatility, Cadence Design Systems is 1.38 times less risky than Magic Software. The stock trades about -0.14 of its potential returns per unit of risk. The Magic Software Enterprises is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,020 in Magic Software Enterprises on September 24, 2024 and sell it today you would earn a total of 100.00 from holding Magic Software Enterprises or generate 9.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cadence Design Systems vs. Magic Software Enterprises
Performance |
| Timeline |
| Cadence Design Systems |
| Magic Software Enter |
Cadence Design and Magic Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Design and Magic Software
The main advantage of trading using opposite Cadence Design and Magic Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Design position performs unexpectedly, Magic Software 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 Magic Software will offset losses from the drop in Magic Software's long position.| Cadence Design vs. Intuit Inc | Cadence Design vs. Palo Alto Networks | Cadence Design vs. Synopsys | Cadence Design vs. Dassault Systmes SE |
| Magic Software vs. Intuit Inc | Magic Software vs. Palo Alto Networks | Magic Software vs. Synopsys | Magic Software vs. Cadence Design Systems |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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