Correlation Between Trend Micro and Synopsys

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

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

Diversification Opportunities for Trend Micro and Synopsys

-0.41

Correlation Coefficient

Trend Micro  Synopsys

Very good diversification

The 3 months correlation between Trend and Synopsys is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Trend Micro ADR and Synopsys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synopsys and Trend Micro 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 Trend Micro ADR 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 Trend Micro i.e., Trend Micro and Synopsys go up and down completely randomly.

Pair Corralation between Trend Micro and Synopsys

Assuming the 90 days horizon Trend Micro ADR is expected to under-perform the Synopsys. But the pink sheet apears to be less risky and, when comparing its historical volatility, Trend Micro ADR is 1.5 times less risky than Synopsys. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Synopsys is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Trend Micro ADR  vs.  Synopsys

Trend Micro ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trend Micro ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Trend Micro and Synopsys

The main advantage of trading using opposite Trend Micro and Synopsys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trend Micro 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 Trend Micro ADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.