Correlation Between Biomarin Pharmaceutical and Synopsys

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Can any of the company-specific risk be diversified away by investing in both Biomarin Pharmaceutical 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 Biomarin Pharmaceutical and Synopsys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biomarin Pharmaceutical and Synopsys, you can compare the effects of market volatilities on Biomarin Pharmaceutical 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 Biomarin Pharmaceutical with a short position of Synopsys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biomarin Pharmaceutical and Synopsys.

Diversification Opportunities for Biomarin Pharmaceutical and Synopsys

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Biomarin and Synopsys is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Biomarin Pharmaceutical and Synopsys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synopsys and Biomarin Pharmaceutical 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 Biomarin Pharmaceutical 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 Biomarin Pharmaceutical i.e., Biomarin Pharmaceutical and Synopsys go up and down completely randomly.

Pair Corralation between Biomarin Pharmaceutical and Synopsys

Given the investment horizon of 90 days Biomarin Pharmaceutical is expected to generate 0.68 times more return on investment than Synopsys. However, Biomarin Pharmaceutical is 1.47 times less risky than Synopsys. It trades about 0.55 of its potential returns per unit of risk. Synopsys is currently generating about 0.2 per unit of risk. If you would invest  8,093  in Biomarin Pharmaceutical on September 10, 2022 and sell it today you would earn a total of  2,346  from holding Biomarin Pharmaceutical or generate 28.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Biomarin Pharmaceutical  vs.  Synopsys

 Performance (%) 
       Timeline  
Biomarin Pharmaceutical 
Biomarin Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Biomarin Pharmaceutical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Biomarin Pharmaceutical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Biomarin Price Channel

Synopsys 
Synopsys Performance
0 of 100
Over the last 90 days Synopsys has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Synopsys is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Synopsys Price Channel

Biomarin Pharmaceutical and Synopsys Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Biomarin Pharmaceutical and Synopsys

The main advantage of trading using opposite Biomarin Pharmaceutical and Synopsys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biomarin Pharmaceutical 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.
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The idea behind Biomarin Pharmaceutical 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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Check out your portfolio center. 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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