Correlation Between Kaiser Aluminum and Cadence Design
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum and Cadence Design 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 Kaiser Aluminum and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and Cadence Design Systems, you can compare the effects of market volatilities on Kaiser Aluminum and Cadence Design 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 Kaiser Aluminum with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Cadence Design.
Diversification Opportunities for Kaiser Aluminum and Cadence Design
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kaiser and Cadence is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems and Kaiser Aluminum 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 Kaiser Aluminum are associated (or correlated) with Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Cadence Design go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and Cadence Design
Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 1.08 times less return on investment than Cadence Design. In addition to that, Kaiser Aluminum is 1.61 times more volatile than Cadence Design Systems. It trades about 0.14 of its total potential returns per unit of risk. Cadence Design Systems is currently generating about 0.24 per unit of volatility. If you would invest 28,934 in Cadence Design Systems on September 5, 2024 and sell it today you would earn a total of 2,391 from holding Cadence Design Systems or generate 8.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaiser Aluminum vs. Cadence Design Systems
Performance |
| Timeline |
| Kaiser Aluminum |
| Cadence Design Systems |
Kaiser Aluminum and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaiser Aluminum and Cadence Design
The main advantage of trading using opposite Kaiser Aluminum and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum position performs unexpectedly, Cadence Design 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 Cadence Design will offset losses from the drop in Cadence Design's long position.| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
| Cadence Design vs. HeartCore Enterprises | Cadence Design vs. Beamr Imaging Ltd | Cadence Design vs. Trust Stamp | Cadence Design vs. CXApp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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