Correlation Between S A P and Humbl

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

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

Diversification Opportunities for S A P and Humbl

0.66

Correlation Coefficient

S A P  Humbl

Poor diversification

The 3 months correlation between SAP and Humbl is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Humbl Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humbl Inc and S A P 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 SAP SE ADR are associated (or correlated) with Humbl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humbl Inc has no effect on the direction of S A P i.e., S A P and Humbl go up and down completely randomly.

Pair Corralation between S A P and Humbl

Considering the 90-day investment horizon S A P is expected to generate 46.99 times less return on investment than Humbl. But when comparing it to its historical volatility, SAP SE ADR is 29.81 times less risky than Humbl. It trades about 0.14 of its potential returns per unit of risk. Humbl Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Humbl Inc on September 13, 2024 and sell it today you would earn a total of  0.09  from holding Humbl Inc or generate 450.0% return on investment over 90 days.

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

SAP SE ADR  vs.  Humbl Inc

SAP SE ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, S A P reported solid returns over the last few months and may actually be approaching a breakup point.

Humbl Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Humbl Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, Humbl disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with S A P and Humbl

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

The idea behind SAP SE ADR and Humbl Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.