Correlation Between Intuit and Synopsys

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

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

Diversification Opportunities for Intuit and Synopsys

0.47

Correlation Coefficient

Intuit  Synopsys

Very weak diversification

The 3 months correlation between Intuit and Synopsys is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Intuit Inc and Synopsys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synopsys and Intuit 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 Intuit Inc 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 Intuit i.e., Intuit and Synopsys go up and down completely randomly.

Pair Corralation between Intuit and Synopsys

Assuming the 90 days horizon Intuit Inc is expected to generate 1.08 times more return on investment than Synopsys. However, Intuit is 1.08 times more volatile than Synopsys. It trades about -0.06 of its potential returns per unit of risk. Synopsys is currently generating about -0.09 per unit of risk. If you would invest  61,255  in Intuit Inc on December 30, 2024 and sell it today you would lose (5,995) from holding Intuit Inc or give up 9.79% of portfolio value over 90 days.

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

Intuit Inc  vs.  Synopsys

Intuit Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intuit Inc 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

Very Weak

Over the last 90 days Synopsys 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.

Pair Trading with Intuit and Synopsys

The main advantage of trading using opposite Intuit and Synopsys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intuit 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 Intuit Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.