Correlation Between Synopsys and Adyen NV

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

By analyzing existing cross correlation between Synopsys and Adyen NV, you can compare the effects of market volatilities on Synopsys and Adyen NV 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 Adyen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Synopsys and Adyen NV.

Diversification Opportunities for Synopsys and Adyen NV

0.64

Correlation Coefficient

Synopsys  Adyen NV

Poor diversification

The 3 months correlation between Synopsys and Adyen is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Synopsys and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV 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 Adyen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adyen NV has no effect on the direction of Synopsys i.e., Synopsys and Adyen NV go up and down completely randomly.

Pair Corralation between Synopsys and Adyen NV

Given the investment horizon of 90 days Synopsys is expected to generate 0.68 times more return on investment than Adyen NV. However, Synopsys is 1.46 times less risky than Adyen NV. It trades about -0.34 of its potential returns per unit of risk. Adyen NV is currently generating about -0.23 per unit of risk. If you would invest  58,432  in Synopsys on January 25, 2024 and sell it today you would lose (5,682) from holding Synopsys or give up 9.72% of portfolio value over 90 days.

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

Synopsys  vs.  Adyen NV

Synopsys

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Synopsys is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Adyen NV

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Adyen NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synopsys and Adyen NV

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

The idea behind Synopsys and Adyen NV 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.