Correlation Between S A P and VITEC SOFTWARE

Can any of the company-specific risk be diversified away by investing in both S A P and VITEC SOFTWARE 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 VITEC SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SAP SE and VITEC SOFTWARE GROUP, you can compare the effects of market volatilities on S A P and VITEC SOFTWARE 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 VITEC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and VITEC SOFTWARE.

Diversification Opportunities for S A P and VITEC SOFTWARE

0.35

Correlation Coefficient

S A P  VITEC SOFTWARE

Weak diversification

The 3 months correlation between SAP and VITEC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and VITEC SOFTWARE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VITEC SOFTWARE 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 are associated (or correlated) with VITEC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VITEC SOFTWARE GROUP has no effect on the direction of S A P i.e., S A P and VITEC SOFTWARE go up and down completely randomly.

Pair Corralation between S A P and VITEC SOFTWARE

Assuming the 90 days trading horizon SAP SE is expected to generate 0.6 times more return on investment than VITEC SOFTWARE. However, SAP SE is 1.67 times less risky than VITEC SOFTWARE. It trades about 0.02 of its potential returns per unit of risk. VITEC SOFTWARE GROUP is currently generating about -0.04 per unit of risk. If you would invest  17,484  in SAP SE on March 2, 2024 and sell it today you would earn a total of  126.00  from holding SAP SE or generate 0.72% return on investment over 90 days.

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

SAP SE  vs.  VITEC SOFTWARE GROUP

SAP SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, S A P is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

VITEC SOFTWARE GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VITEC SOFTWARE GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic 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 VITEC SOFTWARE

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

The idea behind SAP SE and VITEC SOFTWARE 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.