Correlation Between Ring Energy and S A P

Can any of the company-specific risk be diversified away by investing in both Ring Energy 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 Ring Energy 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 Ring Energy and SAP SE, you can compare the effects of market volatilities on Ring Energy 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 Ring Energy with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ring Energy and S A P.

Diversification Opportunities for Ring Energy and S A P

-0.45

Correlation Coefficient

Ring Energy  S A P

Very good diversification

The 3 months correlation between Ring and SAP is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ring Energy and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and Ring Energy 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 Ring Energy 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 has no effect on the direction of Ring Energy i.e., Ring Energy and S A P go up and down completely randomly.

Pair Corralation between Ring Energy and S A P

Assuming the 90 days trading horizon Ring Energy is expected to under-perform the S A P. In addition to that, Ring Energy is 2.59 times more volatile than SAP SE. It trades about -0.06 of its total potential returns per unit of risk. SAP SE is currently generating about 0.16 per unit of volatility. If you would invest  19,756  in SAP SE on September 3, 2024 and sell it today you would earn a total of  2,719  from holding SAP SE or generate 13.76% return on investment over 90 days.

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

Ring Energy  vs.  SAP SE

Ring Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SAP SE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, S A P reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ring Energy and S A P

The main advantage of trading using opposite Ring Energy and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ring Energy 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 Ring Energy 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.