Correlation Between Zhihu and Cadence Design
Can any of the company-specific risk be diversified away by investing in both Zhihu 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 Zhihu and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zhihu Inc ADR and Cadence Design Systems, you can compare the effects of market volatilities on Zhihu 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 Zhihu with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhihu and Cadence Design.
Diversification Opportunities for Zhihu and Cadence Design
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Zhihu and Cadence is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Zhihu Inc ADR 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 Zhihu 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 Zhihu Inc ADR 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 Zhihu i.e., Zhihu and Cadence Design go up and down completely randomly.
Pair Corralation between Zhihu and Cadence Design
Allowing for the 90-day total investment horizon Zhihu is expected to generate 1.13 times less return on investment than Cadence Design. In addition to that, Zhihu is 1.98 times more volatile than Cadence Design Systems. It trades about 0.07 of its total potential returns per unit of risk. Cadence Design Systems is currently generating about 0.16 per unit of volatility. 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 |
Zhihu Inc ADR vs. Cadence Design Systems
Performance |
| Timeline |
| Zhihu Inc ADR |
| Cadence Design Systems |
Zhihu and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhihu and Cadence Design
The main advantage of trading using opposite Zhihu and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhihu 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.The idea behind Zhihu Inc ADR and Cadence Design Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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