Correlation Between Shopify and Autodesk

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

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

Diversification Opportunities for Shopify and Autodesk

0.84

Correlation Coefficient

Shopify  Autodesk

Very poor diversification

The 3 months correlation between Shopify and Autodesk is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Autodesk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autodesk and Shopify 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 Shopify are associated (or correlated) with Autodesk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autodesk has no effect on the direction of Shopify i.e., Shopify and Autodesk go up and down completely randomly.

Pair Corralation between Shopify and Autodesk

Given the investment horizon of 90 days Shopify is expected to generate 1.98 times more return on investment than Autodesk. However, Shopify is 1.98 times more volatile than Autodesk. It trades about 0.21 of its potential returns per unit of risk. Autodesk is currently generating about 0.12 per unit of risk. If you would invest  7,407  in Shopify on August 30, 2024 and sell it today you would earn a total of  3,847  from holding Shopify or generate 51.94% return on investment over 90 days.

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

Shopify  vs.  Autodesk

Shopify

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Autodesk

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Autodesk are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Autodesk may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Shopify and Autodesk

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

The idea behind Shopify and Autodesk 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.