Correlation Between Analog Devices and Cadence Design

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

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

Diversification Opportunities for Analog Devices and Cadence Design

0.33

Correlation Coefficient

Analog Devices  Cadence Design

Weak diversification

The 3 months correlation between Analog and Cadence is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices 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 Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and Cadence Design go up and down completely randomly.

Pair Corralation between Analog Devices and Cadence Design

Considering the 90-day investment horizon Analog Devices is expected to generate 1.28 times less return on investment than Cadence Design. But when comparing it to its historical volatility, Analog Devices is 1.27 times less risky than Cadence Design. It trades about 0.13 of its potential returns per unit of risk. Cadence Design Systems is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  30,883  in Cadence Design Systems on May 3, 2025 and sell it today you would earn a total of  5,574  from holding Cadence Design Systems or generate 18.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Analog Devices  vs.  Cadence Design Systems

Analog Devices

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, Analog Devices demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Cadence Design Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Design Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cadence Design unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and Cadence Design

The main advantage of trading using opposite Analog Devices and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.