Correlation Between Trade Desk and SAP SE

Can any of the company-specific risk be diversified away by investing in both Trade Desk and SAP SE 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 Trade Desk and SAP SE into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Trade Desk and SAP SE

0.93

Correlation Coefficient

Trade Desk  SAP SE

Almost no diversification

The 3 months correlation between Trade and SAP is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE and Trade Desk 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 The Trade Desk are associated (or correlated) with SAP SE. 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 Trade Desk i.e., Trade Desk and SAP SE go up and down completely randomly.

Pair Corralation between Trade Desk and SAP SE

Assuming the 90 days horizon The Trade Desk is expected to generate 1.27 times more return on investment than SAP SE. However, Trade Desk is 1.27 times more volatile than SAP SE. It trades about 0.26 of its potential returns per unit of risk. SAP SE is currently generating about 0.16 per unit of risk. If you would invest  9,167  in The Trade Desk on September 4, 2024 and sell it today you would earn a total of  3,643  from holding The Trade Desk or generate 39.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

The Trade Desk  vs.  SAP SE

Trade Desk

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Trade Desk reported solid returns over the last few months and may actually be approaching a breakup point.

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, SAP SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trade Desk and SAP SE

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

The idea behind The Trade Desk 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.