Correlation Between Kingdee International and Cadence Design

Can any of the company-specific risk be diversified away by investing in both Kingdee International 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 Kingdee International and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kingdee International Software and Cadence Design Systems, you can compare the effects of market volatilities on Kingdee International 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 Kingdee International with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingdee International and Cadence Design.

Diversification Opportunities for Kingdee International and Cadence Design

-0.19

Correlation Coefficient

Kingdee International  Cadence Design

Good diversification

The 3 months correlation between Kingdee and Cadence is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software 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 Kingdee International 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 Kingdee International Software 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 Kingdee International i.e., Kingdee International and Cadence Design go up and down completely randomly.

Pair Corralation between Kingdee International and Cadence Design

Assuming the 90 days horizon Kingdee International Software is expected to generate 0.15 times more return on investment than Cadence Design. However, Kingdee International Software is 6.72 times less risky than Cadence Design. It trades about 0.21 of its potential returns per unit of risk. Cadence Design Systems is currently generating about -0.25 per unit of risk. If you would invest  96.00  in Kingdee International Software on February 4, 2024 and sell it today you would earn a total of  1.00  from holding Kingdee International Software or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kingdee International Software  vs.  Cadence Design Systems

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Kingdee International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Cadence Design Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cadence Design Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cadence Design is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kingdee International and Cadence Design

The main advantage of trading using opposite Kingdee International and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingdee International 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 Kingdee International Software 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.