Correlation Between Smith Douglas and Cadence Design
Can any of the company-specific risk be diversified away by investing in both Smith Douglas 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 Smith Douglas and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smith Douglas Homes and Cadence Design Systems, you can compare the effects of market volatilities on Smith Douglas 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 Smith Douglas with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smith Douglas and Cadence Design.
Diversification Opportunities for Smith Douglas and Cadence Design
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Smith and Cadence is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Smith Douglas Homes 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 Smith Douglas 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 Smith Douglas Homes 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 Smith Douglas i.e., Smith Douglas and Cadence Design go up and down completely randomly.
Pair Corralation between Smith Douglas and Cadence Design
Given the investment horizon of 90 days Smith Douglas Homes is expected to under-perform the Cadence Design. In addition to that, Smith Douglas is 1.09 times more volatile than Cadence Design Systems. It trades about -0.03 of its total potential returns per unit of risk. Cadence Design Systems is currently generating about 0.3 per unit of volatility. If you would invest 25,277 in Cadence Design Systems on August 29, 2024 and sell it today you would earn a total of 5,733 from holding Cadence Design Systems or generate 22.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smith Douglas Homes vs. Cadence Design Systems
Performance |
| Timeline |
| Smith Douglas Homes |
| Cadence Design Systems |
Smith Douglas and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smith Douglas and Cadence Design
The main advantage of trading using opposite Smith Douglas and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith Douglas 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.| Smith Douglas vs. Albertsons Companies | Smith Douglas vs. United Homes Group | Smith Douglas vs. Haverty Furniture Companies | Smith Douglas vs. Beyond Meat |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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