Correlation Between Dassault Systmes and Synopsys

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

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

Diversification Opportunities for Dassault Systmes and Synopsys

-0.48

Correlation Coefficient

Dassault Systmes  Synopsys

Very good diversification

The 3 months correlation between Dassault and Synopsys is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systmes SE and Synopsys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synopsys and Dassault Systmes 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 Dassault Systmes SE 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 Dassault Systmes i.e., Dassault Systmes and Synopsys go up and down completely randomly.

Pair Corralation between Dassault Systmes and Synopsys

Assuming the 90 days horizon Dassault Systmes SE is expected to generate 0.51 times more return on investment than Synopsys. However, Dassault Systmes SE is 1.97 times less risky than Synopsys. It trades about -0.03 of its potential returns per unit of risk. Synopsys is currently generating about -0.14 per unit of risk. If you would invest  3,220  in Dassault Systmes SE on September 23, 2024 and sell it today you would lose (40.00) from holding Dassault Systmes SE or give up 1.24% of portfolio value over 90 days.

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

Dassault Systmes SE  vs.  Synopsys

Dassault Systmes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systmes SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Synopsys

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Synopsys are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Synopsys is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dassault Systmes and Synopsys

The main advantage of trading using opposite Dassault Systmes and Synopsys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dassault Systmes 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 Dassault Systmes SE 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.