Correlation Between S A P and Verint Systems
Can any of the company-specific risk be diversified away by investing in both S A P and Verint Systems 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 Verint Systems 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 Verint Systems, you can compare the effects of market volatilities on S A P and Verint Systems 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 Verint Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Verint Systems.
Diversification Opportunities for S A P and Verint Systems
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SAP and Verint is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE ADR and Verint Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verint Systems 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 Verint Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verint Systems has no effect on the direction of S A P i.e., S A P and Verint Systems go up and down completely randomly.
Pair Corralation between S A P and Verint Systems
Considering the 90-day investment horizon SAP SE ADR is expected to generate 0.43 times more return on investment than Verint Systems. However, SAP SE ADR is 2.33 times less risky than Verint Systems. It trades about -0.25 of its potential returns per unit of risk. Verint Systems is currently generating about -0.12 per unit of risk. If you would invest 19,038 in SAP SE ADR on January 20, 2024 and sell it today you would lose (1,174) from holding SAP SE ADR or give up 6.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE ADR vs. Verint Systems
Performance |
| Timeline |
| SAP SE ADR |
| Verint Systems |
S A P and Verint Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and Verint Systems
The main advantage of trading using opposite S A P and Verint Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P position performs unexpectedly, Verint Systems 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 Verint Systems will offset losses from the drop in Verint Systems' long position.| S A P vs. Tyler Technologies | S A P vs. Roper Technologies Common | S A P vs. Cadence Design Systems | S A P vs. PTC Inc |
| Verint Systems vs. Evertec | Verint Systems vs. CSG Systems International | Verint Systems vs. Radware | Verint Systems vs. NetScout Systems |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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