Correlation Between EGain and S A P

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

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

Diversification Opportunities for EGain and S A P

-0.39

Correlation Coefficient

EGain  S A P

Very good diversification

The 3 months correlation between EGain and SAP is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding eGain and SAP SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE ADR and EGain 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 eGain are associated (or correlated) with S A P. 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 ADR has no effect on the direction of EGain i.e., EGain and S A P go up and down completely randomly.

Pair Corralation between EGain and S A P

Given the investment horizon of 90 days eGain is expected to generate 3.13 times more return on investment than S A P. However, EGain is 3.13 times more volatile than SAP SE ADR. It trades about -0.01 of its potential returns per unit of risk. SAP SE ADR is currently generating about -0.07 per unit of risk. If you would invest  525.00  in eGain on August 31, 2024 and sell it today you would lose (12.00) from holding eGain or give up 2.29% of portfolio value over 90 days.

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

eGain  vs.  SAP SE ADR

eGain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eGain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

SAP SE ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with EGain and S A P

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

The idea behind eGain and SAP SE 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.

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 the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.