Volatility – Cadence Design Systems (CDNS)

In the following quantitative analysis we will take a look at three companies operating in a thriving sector in recent years, that is gaming: Take Two, Eletronic Arts and Activision Blizzard. These companies are active in the video game field, have a moderate correlation on a daily basis.

In the stock market, periods of flat market can be observed.

Stocks that make up the S&P500 index, which over the last 10 years has been marked by a pronounced bull market, may present seasonal periods characterized by low volatility and defining a flat market.

The reasons may be different: economic periods due to the characteristics of the sector of reference of the company, strategies of a given company that fall in the same period, lack of particular interest from investors, etc. But this is not the most important thing: the important thing is to find these situations and study if it is possible to exploit them.

An example is Cadence Design Systems (CDNS). In the period 2011-2019 the volatility of the month of January is almost 30% lower than the historical volatility observed in the same period for all months.

Dev.st CDNS Genuary (2011-2019) → 1.49%.

Dev.st CDNS (2011-2019) → 2.09%.

The month of January is also characterized by a price swing from the average on positive and negative days almost indentical.

devst + → 0.94%

devst – → 0.97%

The January environment, described by the previous numbers, is graphically represented by the year-by-year charts in the picture.

As we can observe – except in 2019 – no one-direction trends are observed. Characteristic remained also in 2020 and 2021.

This can give some idea or signal of possible mean-reverting entries, with a short half-time in a situation where probably there will be no high volatility. Analysis, which can be deepened also for lower time-frames.