Correlation Between SAP SE and S A P

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

Diversification Opportunities for SAP SE and S A P

0.94

Correlation Coefficient

SAP SE  S A P

Almost no diversification

The 3 months correlation between SAP and SAP is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and SAP SE 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 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 SAP SE i.e., SAP SE and S A P go up and down completely randomly.

Pair Corralation between SAP SE and S A P

Assuming the 90 days trading horizon SAP SE is expected to generate 1.25 times less return on investment than S A P. In addition to that, SAP SE is 1.18 times more volatile than SAP SE. It trades about 0.12 of its total potential returns per unit of risk. SAP SE is currently generating about 0.18 per unit of volatility. If you would invest  21,450  in SAP SE on September 1, 2024 and sell it today you would earn a total of  1,025  from holding SAP SE or generate 4.78% return on investment over 90 days.

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

SAP SE  vs.  SAP SE

SAP SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SAP SE may actually be approaching a critical reversion point that can send shares even higher in December 2024.

SAP SE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady 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 SAP SE and S A P

The main advantage of trading using opposite SAP SE and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAP SE 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 SAP 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.