Correlation Between S A P and ZOO Digital

Can any of the company-specific risk be diversified away by investing in both S A P and ZOO Digital 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 ZOO Digital 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 ZOO Digital Group, you can compare the effects of market volatilities on S A P and ZOO Digital 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 ZOO Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and ZOO Digital.

Diversification Opportunities for S A P and ZOO Digital

-0.68

Correlation Coefficient

S A P  ZOO Digital

Excellent diversification

The 3 months correlation between SAP and ZOO is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and ZOO Digital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZOO Digital Group 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 ZOO Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZOO Digital Group has no effect on the direction of S A P i.e., S A P and ZOO Digital go up and down completely randomly.

Pair Corralation between S A P and ZOO Digital

Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.44 times more return on investment than ZOO Digital. However, SAP SE ADR is 2.27 times less risky than ZOO Digital. It trades about 0.22 of its potential returns per unit of risk. ZOO Digital Group is currently generating about -0.21 per unit of risk. If you would invest  23,447  in SAP SE ADR on September 13, 2024 and sell it today you would earn a total of  1,506  from holding SAP SE ADR or generate 6.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

SAP SE ADR  vs.  ZOO Digital Group

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.

ZOO Digital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZOO Digital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with S A P and ZOO Digital

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

The idea behind SAP SE ADR and ZOO Digital Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.