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

-0.47

Correlation Coefficient

Synopsys  Trend Micro

Very good diversification

The 3 months correlation between Synopsys and Trend is -0.47. 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 39.76 times less return on investment than Trend Micro. In addition to that, Synopsys is 1.02 times more volatile than Trend Micro ADR. It trades about 0.0 of its total potential returns per unit of risk. Trend Micro ADR is currently generating about 0.08 per unit of volatility. If you would invest  5,980  in Trend Micro ADR on December 5, 2024 and sell it today you would earn a total of  1,438  from holding Trend Micro ADR or generate 24.05% return on investment over 90 days.

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

Synopsys  vs.  Trend Micro ADR

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Trend Micro ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trend Micro ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Trend Micro showed solid returns over the last few months and may actually be approaching a breakup point.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.