Correlation Between Afterpay and Synopsys

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

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

Diversification Opportunities for Afterpay and Synopsys

0.0

Correlation Coefficient

Afterpay  Synopsys

Pay attention - limited upside

The 3 months correlation between Afterpay and Synopsys is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Afterpay Limited and Synopsys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synopsys and Afterpay 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 Afterpay Limited are associated (or correlated) with Synopsys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synopsys has no effect on the direction of Afterpay i.e., Afterpay and Synopsys go up and down completely randomly.

Pair Corralation between Afterpay and Synopsys

If you would invest  49,595  in Synopsys on September 18, 2024 and sell it today you would earn a total of  2,616  from holding Synopsys or generate 5.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Afterpay Limited  vs.  Synopsys

Afterpay Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Synopsys

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Synopsys are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Synopsys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Afterpay and Synopsys

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

The idea behind Afterpay Limited and Synopsys 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.