Correlation Between Synopsys and Trend Micro

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

By analyzing existing cross correlation between Synopsys and Trend Micro ADR, you can compare the effects of market volatilities on Synopsys and Trend Micro 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 Synopsys with a short position of Trend Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synopsys and Trend Micro.

Diversification Opportunities for Synopsys and Trend Micro

-0.26

Correlation Coefficient

Synopsys  Trend Micro

Very good diversification

The 3 months correlation between Synopsys and Trend is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Synopsys and Trend Micro ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trend Micro ADR and Synopsys 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 Synopsys are associated (or correlated) with Trend Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trend Micro ADR has no effect on the direction of Synopsys i.e., Synopsys and Trend Micro go up and down completely randomly.

Pair Corralation between Synopsys and Trend Micro

Given the investment horizon of 90 days Synopsys is expected to generate 1.53 times more return on investment than Trend Micro. However, Synopsys is 1.53 times more volatile than Trend Micro ADR. It trades about 0.0 of its potential returns per unit of risk. Trend Micro ADR is currently generating about -0.07 per unit of risk. If you would invest  51,331  in Synopsys on September 27, 2024 and sell it today you would lose (1,315) from holding Synopsys or give up 2.56% of portfolio value over 90 days.

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

Synopsys  vs.  Trend Micro ADR

Synopsys

Risk-Adjusted Performance

0 of 100

Very Weak

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

Trend Micro ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trend Micro ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Synopsys and Trend Micro

The main advantage of trading using opposite Synopsys and Trend Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Synopsys position performs unexpectedly, Trend Micro 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 Trend Micro will offset losses from the drop in Trend Micro's long position.

The idea behind Synopsys and Trend Micro ADR 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.