Correlation Between Rocket Internet and S A P

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

Diversification Opportunities for Rocket Internet and S A P

0.34

Correlation Coefficient

Rocket Internet  S A P

Weak diversification

The 3 months correlation between Rocket and SAP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and Rocket Internet 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 Rocket Internet SE 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 Rocket Internet i.e., Rocket Internet and S A P go up and down completely randomly.

Pair Corralation between Rocket Internet and S A P

Assuming the 90 days trading horizon Rocket Internet is expected to generate 3.61 times less return on investment than S A P. But when comparing it to its historical volatility, Rocket Internet SE is 1.0 times less risky than S A P. It trades about 0.05 of its potential returns per unit of risk. SAP SE is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  20,685  in SAP SE on September 23, 2024 and sell it today you would earn a total of  2,990  from holding SAP SE or generate 14.45% return on investment over 90 days.

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

Rocket Internet SE  vs.  SAP SE

Rocket Internet SE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

SAP SE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, S A P unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocket Internet and S A P

The main advantage of trading using opposite Rocket Internet and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet 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 Rocket Internet SE 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.