Correlation Between Roper Technologies and S A P

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

Diversification Opportunities for Roper Technologies and S A P

0.3

Correlation Coefficient

Roper Technologies  S A P

Weak diversification

The 3 months correlation between Roper and SAP is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Roper Technologies Common and SAP SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE ADR and Roper Technologies 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 Roper Technologies Common 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 ADR has no effect on the direction of Roper Technologies i.e., Roper Technologies and S A P go up and down completely randomly.

Pair Corralation between Roper Technologies and S A P

Considering the 90-day investment horizon Roper Technologies Common is expected to under-perform the S A P. But the stock apears to be less risky and, when comparing its historical volatility, Roper Technologies Common is 1.62 times less risky than S A P. The stock trades about -0.34 of its potential returns per unit of risk. The SAP SE ADR is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  19,603  in SAP SE ADR on February 1, 2024 and sell it today you would lose (1,226) from holding SAP SE ADR or give up 6.25% of portfolio value over 90 days.

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

Roper Technologies Common  vs.  SAP SE ADR

Roper Technologies Common

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roper Technologies Common has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Roper Technologies is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

SAP SE ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, S A P is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Roper Technologies and S A P

The main advantage of trading using opposite Roper Technologies and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roper Technologies 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 Roper Technologies Common and SAP SE ADR 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.