Correlation Between INTER CARS and SAP SE

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

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

Diversification Opportunities for INTER CARS and SAP SE

-0.56

Correlation Coefficient

INTER CARS  SAP SE

Excellent diversification

The 3 months correlation between INTER and SAP is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and INTER CARS 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 INTER CARS SA are associated (or correlated) with SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of INTER CARS i.e., INTER CARS and SAP SE go up and down completely randomly.

Pair Corralation between INTER CARS and SAP SE

Assuming the 90 days horizon INTER CARS is expected to generate 2.95 times less return on investment than SAP SE. In addition to that, INTER CARS is 1.34 times more volatile than SAP SE. It trades about 0.03 of its total potential returns per unit of risk. SAP SE is currently generating about 0.1 per unit of volatility. If you would invest  10,163  in SAP SE on September 3, 2024 and sell it today you would earn a total of  12,037  from holding SAP SE or generate 118.44% return on investment over 90 days.

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

INTER CARS SA  vs.  SAP SE

INTER CARS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTER CARS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INTER CARS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SAP SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SAP SE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with INTER CARS and SAP SE

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

The idea behind INTER CARS SA and SAP SE 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.